Mali - Office du Niger - identification report

Document of RETURN TO The World Bank REPCTc 2' FOR OFFICIAL USE ONLY ONE WE-EK Report No. 2135-MLI j.,AL TL OFFICE DU NIGER IDENTIFICATION REPORT June 30, 1978 Agriculture Projects Department West Africa Regional Office This document has a restricted distribution and may be used by recipients only in the perforzance of their official duties. Its contents may not otherwise be disclosed with*ut W*Vorld Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Mali Franc (MF) US$1 - MF 490 MF I - US$0.0020408 MF I million - US$2,041 WEIGHTS AND MEASURES 1 hectare (ha) 2.47 acres I metric ton (t) 2.205 lbs FISCAL YEAR Government January 1 - December 31 Office du Niger January 1 - December 31 ABBREVIATIONS ADF African Development Fund (of the African Development Bank) BAE Bureau d'Affaires Economiques (of the Office du Niger) BEG Bureau d'Etudes Generales (of the Office du Niger) CILSS Comite Inter-Etat de Lutte contre la Secheresse au Sahel DNAFLA Direction Nationale de l'Alphabetisation Fonctionnelle et de la Linguistique Appliquee EDF European Development Fund EIB European Investment Bank GERDAT Groupement d'Etudes et de Recherches par le Developpement de l'Agronomie Tropicale IDA International Development Association (of the World Bank) IER Institut de l'Economie Rurale ILCA International Livestock Research Center for Africa IRAT Institut de Recherches Agronomiques Tropicales et des Produits Vivriers IRCT Institut de Recherches du Coton et des Textiles Exotiques OPAM Office des Produits Agricoles du Mali ORM Operation Riz Mopti ORS Operation Riz Segou SCAER Societe de Credit Agricole et d'Equipement Rural SEMA Societe d'Etudes et de Mathematique Appliquee SOMBEPEC Societe Malienne du Betail, des Peaux et des Cuirs SOMIEX Societe Malienne d'Importation et d'Exportation ST Service des Travaux (of the Office du Niger) USAID United States Agency for International Development WARDA West Africa Rice Development Association ZAF Zone d'Aplhabetisation Fonctionnelle  FOR OFFXIAL USE ONLI MALI OFFICE DU NIGER - IDENTIFICATION REPORT Page No. SUI4MARY AND CONCLUSIONS ................................... i-vi I. INTRODUCTION .............................................. 1 II. BACKGROUND .................. ......... .. .. ... .... I A. General ...1........................................... B. The Rural Sector ..................... ;.......... 2 1. Major Institutions in Agriculture ............... 2 2. Production Base ....... .......................... 4 3. Recent Trends in Crop Production .... ........... 5 4. Development Potential and Objectives . ........... 7 5. Conclusion ...... .............................. ........ 9 III. THE OFFICE DU NIGER ....................... 9 A. Summary Description ...... .................... 9 B. Recent Developments .................................. 11 C. Development Objectives ...... * ....................... 12 IV. DEVELOPMENT CONSTRAINTS AND PRIORITIES .................... 13 A. Development Constraints .............................. 13 1. Irrigation Infrastructure .... ................... 13 2. Farm Structure ................ .. .. .............. 15 3. Agro-Industrial Activities ........... .. ......... 17 4. Management and Organization .................... . 18'o B. Development Priorities . .......... .* . ................. ... 19 V. A REHABILITATION PROGRAM .................................. 20 A. Description of the Rehabilitation Program .... ........ 20 B. Expected Impact on Production, Markets, Employment, and Incomes ....................................... 22 1. Production ..*......................... . ......... 22 2. Markets ................ * ..................... 22 3. Employment ............ .............................. 23 4. Income of Settlers ..... ......................... 23 C. Financial Implications ............................... 24 1. Office du Niger ................................. 24 2. Government ............................................. 25 D. Economic Justification ..... .......................... 26 E. Conclusion ........................................... 27 This document ha a rettricted distribution and may be used by recipients only in th pe -rac of their oMcial duties Its contents may not otherwise be disclosed without World D n uo .  -2- Page No. VI. PROPOSAL FOR A TECHNICAL ASSISTANCE/ENGINEERING PROJECT ... 28 A. Summary Description ...... ............................ 28 B. Detailed Features .. ................................... 29 1. Technical Assistance ............................ 29 2. Civil Works Equipment and Operating Cost ... ..... 30 3. Agricultural Research and Trial Programs ... ..... 31 4. Other Items ..................................... 32 C. Cost and Financing ................................... 32 D. Benefits and Risks of the Project .... ................ 33 VII. SUGGESTIONS FOR OTHER PROJECTS AND STUDIES ................ 34 VIII. NEXT STEPS ................................................ 38 ANNEXES 1. The Office du Niger and Its Settler Population .. ......... 40 2. Irrigation Infrastructures .......................... . . .... 84 3. Agricultural Production ........... .... ... ....................... 115 4. The Rehabilitation Program ...... ..................... ...... 167 5. The Technical Assistance/Engineering Project ............. . 187 6. Summary of the 1977/78 Campaign ........................... 202 7. Documents Used . ........................................... 206  - 3 - LIST OF TABLES ANNEX 1 Table 1: Staff (Permanent Employees) of the Office du Niger, by Service and Qualification, July 1976 Table 2: Staff (Permanent Employees) of the Office du Niger, by Service and Location, July 1976 Table 3: Official Price Schedule for Rice Table 4: Provisional Trading Accounts Table 5: Source and Disposition of Funds - Provisional Statement Table 6: Expenditure of a Capital Nature Table 7: Population of the Office du Niger, June 1, 1977 Table 8: Settler Families by Length of Stay and by Sector, 1935/36-1975/76 Table 9: Distribution of Size of Holdings in the Office du Niger, by Sector, 1975/76 Table 10: Farm Units by Number of Oxen Owned, and by Sector, 1977 Table 11: Farm Units by Number of Ploughs Owned and by Sector, 1977 Table 12: Farm Units by Number of Harrows Owned, and by Sector, 1977 Table 13: Farm Units by Number of Carts Owned, and by Sector, 1977 Table 14: Cross Tabulation of Number of Oxen and Number of Ploughs per Farm Unit, 1977 Table 15: Draught-Oxen and Basic Equipment per ha Cultivated, by Sector, 1976 Table 16: Development of Equipment Ratios and of Yields, 1971/72-1976/77 Table 17: Correlation between Density of Equipment and Yields, 1976/77 Table 18: Animals Kept by Settlers on the Farm, by Sector, 1976 Table 19: Underequipped Settler Families, by Sector, 1976 Table 20: Terminations at the Office du Niger 1975/76 and 1976/77, by Sector and Cause of Termination Table 21: Admission Requests and Admission of Settlers, 1975/76- 1977/78 Table 22: Paddy Deliveries, Cash Income, and Total Income from Rice Cultivation, by Sector, Family and Inhabitant, 1976/77 Table 23: Structure of Farmers' Charges, 1976/77 (FM Million) Table 24: Development of Settlers' Indebtedness 1971/72-1976/77, by Sectors (FM Million) Table 25: School Attendance and Literacy Among Settler Population by Sector (1977)  -4- ANNEX 2 Table 1: Area Developed and Cropped (1977) Table 2: Discharges at Markala Barrage before and after the Construction of the Selingue Dim Table 3a: Water Demand-Supply Balance (m /seS) - Present Situation - Table 3b: Water Demand and Supply Balance (m /Iec) - Short Term Prospects Table 3c: Estimated Gross Irrigation Demand (m /sec) - Present Situation (1978) and Short Term Future (until about 1988) Table 4: Existing Irrigation Area and Possible Medium Term Extension ANNEX 3 Table 1: Monthly Rainfall - Kogoni Table 2: Climatological Data Table 3: Agricultural Calendar Table 4: Developed and Cultivated Areas, by Crop, 1934/35-1977/78 Table 5: Developed and Cultivated Areas, by Sectors, 1977/78 (ha) Table 6: Marketed Production and Estimates of Total Production of Paddy, 1968/69-1976/77 Table 7: Yields per Unit of Production, 1974/75 Table 8: Areas Under Rice Cultivation by Yield Categories (1977) and Sectors Table 9: Development of Fertilizer Use, by Sector, 1975/76-1977/78 Table 10: Paddy Varieties Cultivated in the Office du Niger, 1975/76 Table 11: Rice Mills Operating at the Office du Niger in 1977/78 Table 12: Rice Milling Results 1974/75 and 1975/76 (in %) Table 13: Paddy Storage Capacity and Expected Storage Needs at a Marketing Volume of 72,000 t Table 14: Varieties of Paddy Available at Kogoni Research Station Table 15: Labor and Equipment Input her Ha at the Office du Niger Table 16: Details of Cost of Oxen and Equipment Use per ha Table 17: Farm Budget for Rice Farmers at the Office du Niger, 1976/77 Table 18: Dougabougou and Siribala Sugar Factories (1976/77) Table 19: Development of Sugar Production in Dougabougou and Siribala, 1965/66-1976/77 Table 20: Rations Fed in Office du Niger Feedlots Table 21: Cost of Cattle Fattening According to Office du Niger (1976) Table 22: Prices Prevailing at Niono Cattle Market, December 12; 1977 Table 23: Draught-Oxen and Animal Feed Purchased by Sector, 1976/77 Table 24: Evolution of Seed Cotton Production from 1937 to 1970 Table 25: Cotton Yields on Levelled and Unlevelled Land, by Sector, 1963/64 Table 26: Characteristics of Best Cotton Varieties Available at Kogoni Table 27: Cotton Farmer's Budget, 1965 and 1977 (per ha) Table 28: Cotton Production in the Niono Sector, by Village, 1963/64  -5- ANNEX 4 Table 1: Rehabilitation Program: Summary of Estimated Investment and Indicative Implementation Schedule Table 2: Projection of Paddy Production in the Improved Perimeters of the Canal du Sahel System with and without the Rehabili- tation Project (lst and 2nd Phase) Table 3: Projection of Domestic Paddy Demand and Supply in Mali with and without the Rehabilitation Project Table 4: Recommended Equipment Density at Stage 4 and Cost per ha of Oxen and Equipment Use Table 5: Labor and Equipment Input with the Project (Stage 4) and without the Project (Stages 2 and 3) Table 6: Farm Budget for Rice Farmers at the Office du Niger, with the Project (per ha) Table 7: Comparison of Family Revenue and Returns per Man-Day with and without the Project, for Varying Farm Sizes Table 8: Average and Marginal Returns per Man-Day with and without the Project Table 9: Import Substitution Price of Paddy (in constant 1977 prices; for 1980-85 horizon) at the Office du Niger Table 10: Economic Cost of Farm Inputs with and without the Project Table 11: Allocation of Rehabilitation Costs Table 12: Estimated Benefits and Costs, and Economic Rate of Return of the Rehabilitation Program  -6- LIST OF CHARTS Annex 1, Chart I : Organization Chart Annex 1, Chart II : Development of Settler Population, 1933/34 - 1977/78 Annex 3, Chart I : Developed Area, Cultivated Area (by Crop), and Paddy Marketed per Ha, 1934/35 - 1976/77 - All Sectors Annex 3, Chart II : " - Kolongo Sector Annex 3, Chart III : " - Niono Sector Annex 3, Chart IV " - Molodo Sector Annex 3, Chart V - Kourouma Sector LIST OF MAPS Map I Project Area Location Map II Irrigation Scheme N.B. For technical reasons, all accent signs on French names had to be omitted in the English edition.  MALI OFFICE DU NIGER - IDENTIFICATION REPORT Summary and Conclusions Background (i) At the request of the Government of Mali, an identification mission of the World Bank visited Mali in November/December, 1977, to explore the scope for financial and technical assistance to the Office du Niger. This report is based on the mission's findings, which were discussed with Malian authorities in May 1978. (ii) Mali is a land-locked country in the Sahelian zone of West Africa with a population of 6 million and a per capita income of just under US$100. The Malian economy is dependent on crop production (cotton, groundnuts, cereals) and animal husbandry; it suffered severely from the droughts of the early 'seventies. Crop production recovered satisfactory in the years 1974-1977 but the most recent harvest of 1977/78 was again affected by local droughts and low flood levels in the Niger river system. Having been a net exporter of moderate amounts of cereals in the post-drought years, Mali has to rely again on substantial cereals imports in 1978. This illustrates the extreme volatility of agricultural production, which mainly consists of rainfed agriculture and rice production under uncontrolled and controlled flooding. The experiences of the last decade have underlined the strategic importance of the Office du Niger, the only major irrigation scheme designed to ensure full water control and capable of protecting food production against climatic disturbances. The Office du Niger (iii) The Office du Niger, created in 1932, is a large irrigation scheme off the Niger river near Segou, producing mainly paddy (90,000 tons) and sugar (17,000 tons). Cotton production, which was the main reason for its creation, was phased out in 1970. Infrastructures consist of a barrage at Markala on the Niger river which raises the water level by 5.50 m; a feeder (or headreach) canal of 8 km; two main irrigation canals (Canal du Sahel and Canal de Macina) and a network of primary, secondary, and terminal canals some 6,000 km in length and serving 57,000 ha of irrigable land, of which 43,000 ha are presently under cultivation. The Office du Niger is a state enterprise with 2,850 permanent employees. It obtains its revenue from levies paid by the 4,500 settler families and from the sale of sugar and rice to state trading enterprises. The Office du Niger has, in recent years, been able to cover its recurrent expenditure including equipment renewal and some maintenance on the infrastructure; maintenance is well below required standards, however. (iv) Settlers occupy holdings of 8.5 ha on average (with a considerable spread in the size of holdings); ox-drawn cultivation is the general practice. Cultivation techniques are of the semi-extensive type with broad-cast sowing,  - ii - little weeding, and application of modest amounts of fertilizer. The develop- ment levy is 400 kg of paddy per ha. Average income from rice cultivation was close to US$900 per family or US$80 per capita in 1976/77; including other income from rainfed agriculture and animal husbandry, per capita income was about US$105. (v) The Office du Niger had reached a low in its development in the late 'sixties. Unattractive producer prices, technical problems in cotton cultiva- tion and heavy reliance on direct farming by the Office du Niger were the main reasons. Since that time, the Office du Niger has made a spectacular come-back, increasing the settler production from 30,000 to 51,000 and paddy production from less than 40,000 tons to 90,000 tons. This represents 40% of domestic production, and the marketed volume of 65,000 tons of paddy is approximately two thirds of the quantity marketed through official channels. Except for Chinese financial and technical aid for the construction of the two sugar factories, the Office du Niger has achieved this without external assistance. However, yields of presently 2.25 t/ha on average are still very low for a project designed to ensure full water control. (vi) For the current Five Year Plan (1974-78), the Office du Niger had planned to rehabilitate the entire irrigation infrastructures; to build a new canal (Canal de Costes) opening up a new area for rice and sugar produc- tion; expand areas under rice and sugar-cane by 6,000 ha and 3,000 ha, respectively; to start fodder plant production on 1,000 ha; and to resume cotton cultivation, under improved conditions, on 4,000 ha. Except for the sugar project, none of these objectives could be realized until the end of 1977, but the Office du Niger has started work on the Canal de Costes in April 1978. Development Constraints and Priorities (vii) Major constraints on the further development of the Office du Niger are: - deteriorated irrigation infrastructure and consequent lack of operational elasticity of the system; - insufficient levelling of rice-fields; - drainage problems resulting both from inadequate design and poor maintenance; - excessive size of farm holdings; - underequipment of part of the settler production; - weak participation of settlers in decision-making and operations; - limited rice-milling and storage capacity;  - iii - labor bottlenecks in sugar-cane harvesting; - shortage of engineering capacity; and - lack of commercial and economic skills, and of managerial and planning tools in general. (viii) Rehabilitation of irrigation infrastructures and of rice-fields has been identified as the first priority: - because rehabilitation of several canals, dikes and structures must be undertaken soon if major break-downs in the system are to be avoided; - because Government attaches high priority to increasing rice production, and the essential precondition for achieving a breakthrough in yields is the improvement of on-farm development. This mission recommends, therefore, that rehabilitation of infrastructures and intensification of rice production should be given priority for a period of not less than 5-8 years and that plans calling for major expansions in irrigable area should be postponed until a certain consolidation is achieved. This opinion is shared by Government and Office du Niger authorities. It would be prudent, however, to prepare the ground for future expansion and crop diversification efforts as soon as possible. (ix) Since the People's Republic of China has agreed to finance the reparation of the Markala barrage, the realignment and repair of the headreach canal, and rehabilitation of primary and secondary canals and drains in the areas commanded by the Canal de Macina, the mission recommends that IDA help prepare a rehabilitation program covering the remainder of the Office du Niger, i.e. the entire system and area commanded by the Canal du Sahel (covering 75% of the developed irrigable area). A Rehabilitation Program (x) Since the rehabilitation works outlined below cannot be carried out within a Bank project period of 4-6 years, the term Program is used to designate the whole of these works, which would be executed in two project periods. The Program would consist of: - Rehabilitation and strengthening of irrigation infra- structures (i.e. dikes, canals, drains, structures, service roads); - levelling of some 31,700 ha of rice-fields and reclamation of 5,700 ha of abandoned fields; - technical assistance to strengthen administrative, agri- cultural and technical services of the Office du Niger (including training programs wherever necessary);  - iv - procurement of appropriate maintenance equipment; - preparation of a Master Plan for long term expansion and crop diversification at the Office du Niger; - support for agricultural research and trial programs preparing crop diversification programs; and - support for adult literacy campaigns and community development programs, designed to strengthen participa- tion of the settler population. This report deals mainly with the civil works components, which would absorb about 90% of total costs. Assuming that civil works will be carried out by force account, total cost is estimated at US$43 million (net of tax) in prices of early 1977. This estimate includes 25% physical contingencies, which signal the preliminary nature of these estimates. (xi) The Rehabilitation Program would raise no issue of international water rights since the works would lead to an economy of water rather than to additional water consumption. (xii) With anticipated yields of 3.6 t/ha after rehabilitation, the Program would lead to an increase in paddy production of 58,000 tons over 12 years; 50,000 tons would be marketed, which means an increase of 80% over presently marketed quantities. This increase in production would extend self-sufficiency in rice until the mid-'eighties and leave even a small theo- retical surplus as a safeguard against the effects of droughts on production in other areas of the country. Reclamation of 5,700 ha of abandoned land and a proposed reduction in the average size of holdings from 8.5 ha to 6.5 would permit to settle an additional 2,000 families. Family incomes from rice cultivation would rise from FM 320-570,000 (US$650-1,150) at present to FM 480-700,000 (US$1,000-1,400) after rehabilitation. (xiii) The development levy paid by settlers would be raised from 400 kg to 600 kg of paddy per ha. This would provide incremental income to the Office du Niger which, together with incremental revenue from increased rice sales, would be sufficient to pay for the maintenance of infrastructures according to accepted standards. (xiv) It is assumed that an IDA credit for this productive investment would be passed on by Government to the Office du Niger at terms reflecting the opportunity cost of capital. The Office du Niger's debt servicing capa- city, however, is a function of the Government-determined rice price: If Government keeps rice and paddy prices at levels corresponding to anticipated import substitution prices, the Office du Niger would have ample financial capacity to service a rehabilitation credit, even on commercial terms. If, on the other hand, Government keeps producer prices low for the benefit of urban consumers, it will save substantial budgetary resources on subsidies for rice imports substituted by the Rehabilitation Program, but cannot expect the Office du Niger to service a credit, even on concessional terms.  -v - (xv) The expected economic rate of return of the Program would be 14% under systematically conservative assumptions. The analysis serves mainly to demonstrate that even under such assumptions the Program is justified in economic terms, and to indicate the upper limits which rehabilitation expenditure per ha ought not to exceed. The main limitation of the analysis is the approximate nature of rehabilitation costs, which is due to the fact that few of the plans and designs required for the efficient implementation of the Rehabilitation Program exist at this moment. This has induced the mission to recommend a Technical Assistance/Engineering Project, which would precede the execution of the Rehabilitation Program outlined above. The Technical Assistance/Engineering Project (xvi) The Technical Assistance/Engineering Project would serve to strengthen key services of the Office du Niger, to help prepare the plans and documents required for appraisal and execution of the Rehabilitation Program, test the most cost-effective methods for carrying out these works, in parti- cular the land-levelling program, and lay the basis for agricultural research efforts to be continued during the Rehabilitation Program. Main project components would be: - technical assistance for the Office of the Director General, the Bureau of Technical Studies, and the Works Department; - civil works equipment to carry out urgent repairs on irrigation infrastructures and to implement a pilot program of land levelling; - support for agricultural research and trial programs; - a socio-economic study of the settler production; an aerial photographic survey of the area; miscellaneous equipment and instruments; study travel for Office du Niger engineers; and an audit by internationally recog- nized auditors. Total technical assistance would amount to 156 man-months. Total cost net of tax would be US$4.6 million, of which US$4.0 would be financed by an IDA credit on standard terms and the remainder by Government and the Office du Niger. The IDA credit would be passed on by Government to the Office du Niger, and to the research institutes concerned, as a grant. Appointment of three additional Malian engineers to the Bureau of Technical Studies of the Office du Niger would be a condition of negotiating the Credit. The project would start in late 1978 and extend over 3 years. Appraisal of a first Rehabilitation Project could take place after the second year of the Technical Assistance/Engineering Project if preparation works proceed as scheduled.  - vi - (xvii) The Technical Assistance/Engineering Project would increase the managerial and technical capacity of the Office du Niger and would enable it to execute the Rehabilitation Program with the necessary cost-effectiveness. For IDA, the Project would provide the occasion to observe and test the Office du Niger's performance in various fields, assess further assistance and training requirements, and decide whether and when a Rehabilitation Project can be appraised. The Technical Assistance/Engineering Project may also encourage other sources of external assistance to eventually co-finance a Rehabilitation Project and to assist other priority projects of the Office du Niger not covered by the Technical Assistance/Engineering Project (para. xix below). (xviii) The main risks of the Project are whether suitable consulting firms can be found to carry out this demanding technical assistance assignment and whether the Office du Niger, after 15 years of unassisted operation, will be able and willing to make good use of the technical assistance provided. The latter risk will be much reduced if the consultants are of the required high calibre; the Bank would help the Office du Niger to define terms of reference. Other Projects and Studies (xix) Since this identification report will be submitted for discussion in the Working Group on Irrigation of the Comite Inter-Etat de Lutte contre la Secheresse au Sahel (CILSS), the mission has listed a niumber of suggestions for other projects that need to be prepared, and studies that need to be undertaken. Next Steps (xx) The President's Report and the Credit Agreement for the proposed Technical Assistance/Engineering Project are under preparation. Negotiations are scheduled for August 1978 and Board presentation is planned for early September. The Working Group on Irrigation of the CILSS will discuss this report in Dakar on September 19-22, 1978.  MALI OFFICE DU NIGER - IDENTIFICATION REPORT I. Introduction 1.01 On March 25, 1977, the President of Mali requested the Bank Group's financial and technical assistance for the further development of the Office du Niger, the country's largest irrigation scheme. In his reply, of April 18, 1977, Mr. McNamara expressed the Bank Group's willingness to explore the scope for assistance. A reconnaissance mission made a first brief contact in May 1977 and prepared the way for an identification mission, which was scheduled for November, the optimal time for seeing the irrigation system in operation, and the crops in the field. The identification mission, consisting of Messrs. R. Gusten, C. des Bouvrie, D. Notley, R. O'Sullivan, E. Sinodinos (all of IDA) and D. Aw, H. Boumendil, C. de Caso, and M. Dubois de la Sabloniere (Consult- ants), visited Mali from November 21 to December 9, 1977. This report is based on the mission's findings. 1.02 A draft report dated March 7, 1978, was discussed with Malian authorities in late May 1978. The report has been revised and amended in several points to reflect the observations made by Government and the Office du Niger. 1.03 The Government of Mali has agreed to submit the identification report to the Working Group on Irrigation of the Comite Inter-Etat de Lutte contre la Secheresse au Sahel (CILSS), which comprises the Sahel countries and major sources of foreign assistance. For the attention of this group, a short chapter has been added listing other projects related to the Office du Niger which, in the mission's view, need to be examined and implemented in the near future. Ample background material has been provided in Annexes 1-3. II. Background A. General 2.01 Mali i5 a land-locked country in the Sahelian zone of West Africa (1.24 million km ); more than half the territory is located in the semi-arid Sahel or in the Sahara. The population of 6.25 million (1977 census) has a per capita income of just under US$100. About 90 percent of the population are employed in the primary sector. Cotton and groundnuts are the main cash and export crops. Main food crops are millet and sorghum (close to 1 million tons in years of satisfactory rainfall) and paddy (about 250,000 tons in recent years). Cattle was an important source of foreign exchange until the drought of the early 'seventies; herds have not yet fully recovered from the heavy losses during the drought years.  -2- 2.02 Real growth of GDP averaged 3.7 percent annually in the four pre- drought years 1969-1972. As a consequence of the drought, GDP fell in 1973 and stagnated in 1974 but production recovered in the following two years; for the period 1973-1976 which covers the drought and post-drought years, real growth of GDP again averaged 3.7 percent annually. Population growth being officially estimated at 2.7 percent annually, this corresponds to an increase in GDP per capita of only 1 percent annually. 2.03 While production and exports, with the exception of cattle, re- covered satisfactorily from the drought years, the country's balance of payment deficit gap widened as a consequence of international inflation and was US$33 milion in 1976. The budget deficit has also increased in recent years and was nearly US$21 million in 1975, and US$20 million in 1976. This persistent disequilibrium makes it difficult for Mali to make a significant contribution to the financing of development projects. Since no fundamental change can be anticipated for the next few years, it is imperative that agricultural development projects are financially as self-sufficient as possible. B. The Rural Sector 1. Major Institutions in Agriculture 2.04 Agriculture is the responsibility of the Ministry of Rural Develop- ment. Since 1969, the Ministry has delegated important functions to the so-called Operations de eveloppement, institutions charged with agricultural development in specific regions and enjoying a considerable amount of finan- cial and managerial autonomy. They distribute inputs to farmers and provide extension services, training and credit as well as marketing services for export crops and part of the food crops. Operations may be crop-specific, as in the case of rice or cattle, or deal with all major crops grown in a region. In the case of crop-specific Operations, there may be several Operations for the same crop, each of them responsible for a certain area. 2.05 Several Operations de Developpement are concerned with irrigated crops, in the first place rice, for instance the Operation Riz Segou (financed by the European Development Fund - EDF) and the Operation Riz Mopti (financed by IDA). A minor rice development is underway in the IDA-financed Mali-Sud Agricultural Project. The Office du Niger, which is not an Operation but enjoys an even larger degree of autonomy than these, produces mainly rice and sugar. Finally, rice and sorghum are grown in the USAID-financed Action Riz-Sorgho in the Gao area. Technical preparation of new irrigation projects is the responsibility of the Genie Rural, which in many cases also ensures the technical supervision of construction. The Genie Rural is attached to the Ministry of Rural Development. (The Office du Niger has its own Bureau of Technical Studies for the preparation and supervision of new works).  -3- 2.06 Marketing of Cereals is the responsibility of OPAM (Office des Produits Agricoles du Mali) which has the monopoly for domestic and foreign trade with cereals). However, OPAM is not able to enforce its monopoly in the domestic market. Until 1974, official producer prices were well below the free market price; as a consequence, OPAM purchased only marginal quantities of coarse grains and most of the rice originating in the Office du Niger, where farmers cannot escape the official marketing channel. Since that time, the gap between official prices and free market prices has temporarily become smaller (para. 2.17) but has increased again in 1977/78. OPAM now handles most of the marketed quantity of rice but still not more than half the mar- keted surplus of coarse grains. Private traders are officially banned from wholesaling cereals but have been tolerated recently as attempts to eliminate them have failed. OPAM buys rice from the Office du Niger and the Operations according to price schedules established annually in a negotiation process between the rice producing entities and Government agencies. These schedules ("baremes") specify the charges for collection, bagging, losses and milling, which are reimbursed to the selling entity. 2.07 Supply of farm inputs and farm equipment is the responsibility of SCAER (Societe de Credit Agricole et d'Equipement Rural). Both annual inputs and equipment have been sold at subsidized prices, the subsidy being financed mainly from levies on cotton and groundnuts exports. As indicated by its name, SCAER also provides agricultural credit for the purchase of farm equip- ment, but only to farmers covered by the activities of Operations de Develop- pement. SCAER does not maintain field offices but relies on the Operations for the distribution of inputs, the sale of equipment and the recovery of credit extended. The Operations perceive a percentage of the turnover as a fee. The steep rise in the price of farm implements over the last few years forced SCAER to end subsidization of equipment sales in 1976 and to reduce subsidies on annual inputs such as fertilizer. Because of budgetary diffi- culties, Government considers further reducing and eventually eliminating subsidies on farm inputs. Because of SCAER's difficulties, in recent years, in carrying out the functions assigned to it, Government envisages transfer- ring responsibility for the supply of inputs and equipment to the individual Operations de Developpement. 2.08 Agricultural research in Mali is coordinated by the Institut d'Economie Rurale (IER) of the Ministry of Rural Development. Most agricul- tural research is carried out by French research institutes organized in the Groupement d'Etudes et de Recherches pour le Developpement de l'Agronomie Tropicale (GERDAT). Rice research was, until 1976, the responsibility of the Institut de Recherches Agronomiques Tropicales et de Cultures Vivrieres (IRAT), which operated two research stations for floating rice (at Ibetemi near Mopti, now transferred to Mopti-Nord polder) and non-floating rice (at Kogoni in the Office du Niger area). As from 1976, the West Africa Rice Development Association (WARDA) has assumed responsibility for research on floating rice varieties, while the Kogoni station is now under the direction of the Institut d'Economie Rurale.  -4- 2. Production Base Population 2.09 Mali's population of 6.25 million is officially estimated to grow at 2.7% annually but other estimates are significantly lower (2.3%). Urban population is estimated to grow at about 5%, with the capital Bamako (300,000 inhabitants) growing at about 6-7% p.a. and other towns at about 4% annually on average. Only Bamako has a truly urban structure of population, employ- ment, and consumption; all other towns are still rural in many respects. Close to 90 percent of Mali's population live in rural areas, most of them in areas of higher rainfall (more than 5-600 mm annually) and along the Niger river, or as cattle-rearing nomads. Rainfall and Land 2.10 Less than a quarter of the country receives more than 500 mm of rain annually but because of the size of the country, the per capita endowment with land suitable for crop production or pasture is more favorable than for other Sahelian countries (about 5 ha/inhab.). This is particularly true for land in the Sudano-Guinean Zone with rainfall above 800 mm annually (90% probabil- ity). With 1 ha of arable land in this zone for each inhabitant, Mali is about 50% better off than the Sahelian countries as a whole, and 100% better off with respect to grazing land in this zone of relatively secure rainfall. Water Resources 2.11 In addition, Mali has a considerable irrigation potential along the Niger river. Rice is cultivated in the vast flood plains of the interior delta of the Niger, which is entirely located in Mali. The cultivation system is a hybrid between rainfed agriculture and irrigation because it depends on sufficient and timely rainfall during the early phases of the growing cycle, and on timely and sufficient flooding during the second phase. It is a unique and low-cost production system with substantial scope for expansion; its drawback is the high degree of risk, which limits the scope for intensification. Only the Office du Niger (40,000 ha) - which will be described in detail in the next chapter and the annexes - is designed to ensure full water control. Farm System 2.12 Some 2 million ha are estimated to be under cultivation in Mali, of which more than 90% in rainfed agriculture and close to 10% under irriga- tion or flooding. Of the 450,000 farmers, 80% have 5 ha or less. Differences in holdings are moderate and largely reflect traditional authority and family size. Land tenure still follows the traditional system whereby land is allocated by village chiefs for use but without recognition of individual ownership rights. Food crops occupy close to 90% of the land under rainfed cultivation while the remainder is devoted to cotton and groundnuts. In most  -5 areas, land reserves are still sufficient to practice fallows ensuring resti- tution of soil fertility. Animal traction is more widespread in Mali than in any other Sahelian country; however, its spread has recently been hampered by the steep rise in the price of oxen in the post-drought years. Except for ploughs and oxen, farm equipment is elementary outside the Operations de Developpement; in the latter, cultivators and carts are becoming more frequent. Fertilizer and other annual inputs are also used only in the various Opera- tions. Of the nearly 200,000 ha under some kind of irrigation (full water control, controlled or uncontrolled flooding, flood recession), about half are cultivated by traditional farmers and the rest within Operations and in the Office du Niger. Transport Infrastructure 2.13 Mali is linked with the port of Dakar by rail (1,200 km), and with the port of Abidjan by road (1,200 km) as well as by a combination of road and rail. The road to Abidjan is paved except for some 250 km. The internal road network is adequate in the center of the country (although in need of repair) but poor in the West and the East. The 1st Region (Kayes) can only be reached by rail and has inadequate internal road links. The 6th Region (Gao) is also of difficult access by road and is served mainly by river transport on the Niger between July and December (Compagnie Malienne de Navigation). The capacity of both the railway to Dakar and of the shipping company is limited for technical reasons and because of organizational weaknesses. This causes delays in the supply of agricultural inputs and hampers the timely evacuation of exports to the ports. Summary 2.14 In summary, Malian agriculture is characterized by a relative abundance of land and water resources, and a low level of infrastructures, services and technology; assuming that the inflow of foreign capital on concessional terms can be maintained at a satisfactory level, labor may be expected to be the crucial limiting factor in the longer run. 3. Recent Trends in Crop Production 2.15 Until the drought years of the early 'seventies, development efforts in crop production were directed mostly at export crops while cereals, parti- cularly millet and sorghum, suffered from comparative neglect. Adequate extension services were organized for cotton and groundnuts which were also provided with marketing facilities, fertilizers and other improved inputs. Only a small portion of the area under rainfed cereal crops benefited from similar development programs. Producer prices for export crops were set at more remunerative levels than those for cereals. Past emphasis on cotton and groundnuts is reflected in production trends during recent years: Production of cereals declined from 1.1 million tons in 1967/68 to an average of 0.8  -6- million tons during the drought years 1972/73 and 1973/74 while seed cotton output increased from 42,000 to 65,000 tons in the same period, and the groundnut crop fell slightly from 118,000 tons to 104,000 tons. 2.16 Agricultural production increased substantially in the following three years as a result of good rainfall and higher producer prices for both cash and food crops. Total rainfall was above average in 1974/75, average in 1975/76 and about average, but with an unfavorable distribution, in 1976/77. Production of cereals, including paddy, is estimated to have risen to 1.15 million tons in 1974/75 and 1.2 million in 1975/76 and 1976/77. Cotton and groundnut crops in 1975/76 reached the unprecedented level of 103,000 and 200,000 tons, respectively. Cotton production in 1976/77 main- tained the preceding year's level in spite of less favorable weather con- ditions while groundnut production fell by some 15% as a consequence of the decreasing attractiveness of the official producer price. 2.17 Paddy production in particular has increased steeply in the post-, drought years as the consequence of three factors: - some 55,000 ha of polders have been developed by the Operation Riz Segou and Operation Riz Mopti; these polders, vulnerable to low river water levels, have come into full production for the first time in the post-drought year 1974/75; - the Office du Niger has achieved an increase in efficiency and output; - finally, the 1974 increase in the producer price from MF 25 to MF 40/kg provided a strong incentive for 2-3 years before this increase was eroded by general inflation and the particularly steep increase in prices of agricultural equipment. As a consequence, Mali reached self-sufficiency in the post-drought years and even exported some 20,000 tons of paddy and rice to neighboring countries in 1976 and 1977. 2.18 In 1977/78, however, both rainfall and flood levels were again unsatisfactory. This had led to shortages of millet and sorghum in the remote regions of Kayes and Gao and other marginal production zones. In spite of the increase of the producer price of paddy from MF 40 to MF 45/kg, the paddy harvest is also well below the level of the last three years. Only the Office du Niger, has, as in the earlier drought years, remained untouched by these climatic influences and is expected to produce close to 90,000 tons of paddy. I/ 1/ For a summary of the 1977/78 agricultural year see Annex 6.  -7- 4. Development Potential and Objectives Potential 2.19 In terms of domestic resources spent per unit of foreign exchange earned or saved, Mali has a comparative advantage in the production of cattle and cotton for exports, and of cereals for the domestic market. 2.20 Cotton production is being expanded within the framework of the Operation Mali-Sud. If the targets for 1980/1981 (135,000 ha, 143,000 tons of seed-cotton) are reached, the scope for further expansion of rainfed cotton cultivation will be fairly limited. It is estimated that within the area with more than 800 mm of rainfall, the ceiling will be at 180,000 ha. This limit may be reached in the second half of the eighties within the framework of a follow-up to the Mali-Sud project. It is true that substantial areas of fertile land can be reclaimed for rainfed cotton cultivation in the seasonally inundated plains of southern Mali but the technical and economic aspects of the required flood control investments remain to be explored. 2.21 Mali has a considerable potential for growing rainfed cereals, in particular in the Sudan zone. Production is limited partly by the competing claims on labor resources emanating from cotton and groundnut cultivation but also by a narrow and inelastic market and unsatisfactory marketing arrangements. Coarse grains are smuggled to neighboring countries in quan- tities varying inversely with the harvest outcome in these countries. If stable outlets for exports could be established through trade agreements, cereals production in Southern Mali could be expanded considerably, (in some areas possibly at the expense of groundnut production). 2.22 Mali is also in an excellent position to export rice to neighboring land-locked countries but effective demand in these countries is limited. In Senegal, Mali cannot hope to become competitive. Exports of rice to the coastal countries south of Mali would only be marginally profitable at present but prospects improve over the medium term as a substantial increase of world market rice prices (in real terms) is forecast. Plan Targets 1974-78 2.23 The Government of Mali has decided to give increased attention to the promotion of food crops in order to achieve self-sufficiency not only in normal years but also in years of insufficient rainfall. The current Five Year Plan (1974-1978) reflects the Government's determination to prevent a recurrence of the food shortage experienced in 1972/73 and 1973/74. The plan's development objectives with regard to agriculture are: - to achieve self-sufficiency in food production; - to generate adequate supplies of agricultural raw materials for industrial processing; and  -8- - to ensure increasing surpluses of primary products for exports. Food crops are to take first place in public investment. The emphasis on protecting producers and consumers against climatic hazards has resulted in a strong bias towards irrigated agriculture i.e. rice production: not le~ss than 85 percent of total allocations for food production are set aside for rice and only 15 percent for millet and sorghum, by far the country's most important food crop (80 percent of cereal consumption). 2.24 The Five Year Plan overestimated the rate of increase of rice con- sumption. This overestimate is due to a confusion of human needs and effec- tive demand. The Five Year Plan projects an increase in per capita consumption of rice from the pre-drought level of 20 kg to 28 kg in 1978, 48 kg in 1983, and 79 kg in 1990. The implicit annual growth rate of 8 percent (per capita) is incompatible with the increases in real income that appear possible in Mali over this horizon, and with accepted orders of magnitude of income elasticity of demand. Per capita rice consumption may be expected to grow by about 2 percent annually, and total rice consumption, consequently, by not more than 5 percent annually. This corresponds to some 6,000 tons of rice annually at the 1976 level of consumption. Official estimates have been revised downwards in 1976 but are still appreciably higher than this. Given the paucity of basic data, there is considerable scope for diverging opinions on the subject of the absorptive capacity of the domestic rice market in Mali. For a more detailed discussion of cereals production and marketing issues see the recent Economic Memorandum on Mali, of January 5, 1978, (Report No. 1134a-MLI), in particular Annex I. Plan Achievements 1974-78 2.25 Most of the major crop production projects of-the Five Year Plan have been launched, i.e.: - the Operation Mali-Sud (cotton, cereals); - the Operation Arachides et Cultures Vivrieres (groundnuts, cereals); - the sugar mill of Siribala was completed; - the controlled flooding rice schemes Operation Riz Segou and Operation Rix Mopti have developed further and have been supplemented by follow-up projects. Only the Office du Niger rehabilitation and expansion projects did not get off the ground. This did not prevent the Office du Niger from making an impressive come-back, which will be described in the following chapter.  -9- 5. Conclusion 2.26 The drought years and, again, the disappointing results of the 1977/78 campaign (para. 2.18) have underlined the value of the Office du Nigr as a drought-proof production system capable of ensuring essential minimum requirements of cereals even in years of adverse weather conditions. 2.27 It is true that production by controlled flooding in the Niger flood plains can be developed at much lower cost per ha, but this advantage is off- set by the vulnerability of the system to rain and flood deficiencies. This hazard is an impediment to intensification of production as farmers are reluc- tant to risk the loss of costly inputs such as fertilizer. On the other hand, alternative uses of both land and labor in the flood plains are very limited, which means that opportunity costs of these factors of production are low. Moreover, water is used for irrigation during the flood, when water is abun- dant; thus, there are no opportunity costs of water use. 2.28 While irrigation with full water control is costly to develop, this disadvantage is much reduced in the Office du Niger by the fact that the basic irrigation infrastructure (dam, main canals) exists, which makes for much lower costs of additions to it. The correct policy for Mali would be to aim at a balanced development of both irrigation systems. As drought-proof pro- duction increases, Mali can afford to also expand production in the flood plains; conversely, as the relative share of rice production in the flood plains increases, there is need for a parallel strengthening of the drought- proof production base. The system of controlled flooding (Operations Riz Segou and Mopti) having received considerably more emphasis over the last decade than the Office du Niger, a compensating effort appears to be warranted now on the side of the latter. III. The Office du Niger A. Summary Description 3.01 The Office du Niger is the largest productive enterprise in the country. It produces rice and sugar and uses some of the by-products for cattle-fattening and alcohol production. Cotton production, which was the main reason for its creation (in 1932), has been phased out in 1970 due to technical difficulties. 3.02 The Office du Niger infrastructures 1/ consist of a barrage at Markala on the Niger river which raises the water level by 5.50 m; a feeder canal just upstream of the barrage, which branches into two main 1/ See Maps I and II at the end of the report.  - 10 - irrigation canals (called Canal du Sahel and Canal de Macina) and a network of primary, secondary and terminal canals serving 57,000 ha of irrigable land, of which 42,000 ha are presently under cultivation (39,500 ha under rice, 2,700 ha under sugar cane). The Office du Niger owns and operates 4 rice- mills with a total capacity of about 65,000 tons of paddy, two cattle-fatten- ing units (closed down in 1977) and two sugar factories at Dougabougou (4,000 t) and Siribala (15,000 t), which also produce alcohol. 3.03 Sugar cane is produced in two plantations managed by the Office du Niger with hired labor. Rice is produced nearly entirely by settlers on holdings of 8.5 ha on average (but with considerable deviations from this average figure). Production of paddy "en regie directe", i.e. by the Office du Niger staff with mechanical equipment and hired labor, has been reduced from close to 40% of the cultivated area in 1968 to a mere 600 ha in 1977. There are 4,500 settler families (total population 51,000) working with ox-drawn equipment throughout. Except for mechanical threshing, no machines are used. Settlers pay a levy of 400 kg of rice per ha. Settlers have no property rights but are secure in their holdings as long as they cultivate the land allocated to them and follow cultivation guidelines. 3.04 Since the Office du Niger was transferred to Malian ownership in 1961, it has been a state enterprise. It owns the infrastructures but not the land, which is state property entrusted for economic use to the Office du Niger. The permanent staff is 2,850 and seasonal labor fluctuates between 3,500 and 7,000, most of them for sugar-cane harvesting. Except for Chinese technical assistance to the two Chinese-built sugar factories and a few Soviet technicians for the maintenance of the power-station and some equipment, the Office du Niger is run entirely by Malian staff. 3.05 The Office du Niger obtains its revenue mainly from the sale of sugar and the marketed portion of rice (70% of production). Prices for rice and sugar are negotiated annually with Government and other state agencies and laid down in price schedules (baremes). A third important source of income is the levy paid by the farmers for the use of irrigation infrastruc- tures and extension services. Total sales are expected to exceed FMO10 billion (US$20 million) in 1978. Unlike most other state enterprises in Mali, the Office du Niger has been able to operate without Government subsidy and to produce operating surpluses of varying size in recent years. However, the Office du Niger has not published a balance sheet since the early 'sixties, and it is difficult to say to what extent this apparent surplus represents a profit. 3.06 The Office du Niger enjoys a considerable degree of autonomy. This has been traditionally the case even under the former colonial administration. Since the early 'sixties, the Director General operates without Board of Directors. He reports to the Ministry of Rural Development but is free in his operational decisions. A long-pending valuation of its assets (following the transfer of ownership to Mali and the transfer of some assets to other state agencies) has been carried out in 1974. Formal decisions on the value of the Office du Niger's assets and liabilities are being made now, and full accounts will be prepared for a number of recent years in the course of 1978.  - 11 - 3.07 A more detailed discussion of the Office du Niger will be found in the Annexes: - Annex 1 deals with the Office du Niger and the settler population;. - Annex 2 with irrigation infrastructures; and - Annex 3 with agricultural production. B. Recent Developments 3.08 The Office du Niger initially produced rice and cotton; sugar production started in 1966. In 1970, cotton cultivation was phased out. In 1971, cattle-fattening operations started but were discontinued in 1977. In 1976, a second factory of 15,000 tons capacity began operations, and sugar is now the foremost crop of the Office du Niger in terms of sales value. 3.09 Cotton cultivation was phased out for two reasons: - persistent drainage problems had led to low yields in many areas, consequent high indebtedness of settlers and widespread despondency; - Mali having become, since 1965, a net importer of rice, Government was determined to regain at least self- sufficiency and therefore converted all cotton areas to rice, even those with satisfactory results. 3.10 Between 1968 and 1977, the area under rice cultivation increased from nearly 30,000 ha to nearly 40,000 ha. The settler population, which had declined during the 'sixties, rose from less than 30,000 in 1968 to 51,000 in 1977. Rice production nearly doubled, in the same period, from 46,000 tons to 90,000 tons, and marketed production rose from 25,000 tons to 65,000 tons. Yields increased from 1.54 t/ha to 2.25 t/ha in 1976/77. The Office du Niger now produces about 40% of Mali's rice and accounts for 65-70% of paddy mar- keted through official channels. 3.11 The recovery of rice production, in particular since 1971, can be attributed to the following factors: - transfer of important areas previously cultivated "en regie" to settlers; - conversion of cotton fields to rice cultivation; - the impact of the drought years which brought a fresh inflow of settlers to the Office du Niger;  - 12 - the incentive provided, at least for the 1974-76 period, by a more remunerative producer price; better extension work, introduction of fertilizer use (in modest amounts); and better management. 3.12 The decision to phase out cattle-fattening operations in 1977 was made because of marketing difficulties; the feedlots had been operating satisfactorily from the technical point of view. The marketing difficulties appear to be rooted in managerial and commercial deficiencies in this branch of the Office du Niger's operations and in the stifling effect of the meat export monopoly claimed by the state trading agency SOMBEPEC (Societe Malienne du Betail, des Peaux et des Cuirs). It is hoped that the feedlots can be reactivated in the near future. C. Development Objectives 3.13 The development objectives laid down for the Office du Niger in the Five Year Plan 1974-78 are: (a) the repair of the Markala barrage; (b) the realignment of the feeder canal entrance, the rehabilitation and enlargement of that canal; (c) the rehabilitation and enlargement of the Canal du Sahel and the Canal de Macina as well as of the entire primary, secondary and terminal network of irrigation canals and of drainage canals; (d) rehabilitation, in particular levelling, of the 40,000 ha under rice and reclamation of some 11,000 ha of abandoned land; (e) construction of a third main canal (Canal de Costes), which would open up a new area (Kala Superieur) for rice and sugar production; (f) expansion of the area under rice by 6,000 ha; (g) expansion of sugar cane plantations by 3,000 ha; (h) resumption of cotton production (long-staple) on 4,000 ha; and (i) production of fodder plants on 1,000 ha.  - 13 - 3.14 Except for the sugar project, none of these objectives has been achieved until early 1978. The People's Republic of China has agreed, however, to repair the Markala dam, to realign and rehabilitate the feeder canal, and to rehabilitate primary and secondary canals in the area commanded by the Canal de Macina. These works were repeatedly delayed and are now scheduled to start in autumn 1978. 3.15 In April 1978, the Office du Niger started work on the Canal de Costes; the immediate purpose of the canal (19 km) is the substitution of the pumping stations at the two sugar factories by gravity irrigation. Malian authorities are very worried by the high cost of pumping and by the constant threat of pump breakdowns, which would cause substantial losses in sugar production. For details see Chapter VII, para. 7.07-7.10. IV. Development Constraints and Priorities A. Development Constaints 4.01 In the following, some of the constraints on further progress in the Office du Niger are summarized. Most of them are discussed in more detail in the Annexes. Some relate to the state of irrigation infrastructures, some to the settler population, some to agro-industrial activities, and some to management and organization of the Office du Niger. Each of these aspects will be discussed in turn. 1. Irrigation Infrastructure 4.02 Poor maintenance: Little maintenance work has been done on the irrigation canals, the drainage system, and the structures. Over the last few years, not more than some FM 240 million (FM 6,000/ha) have been spent annually. As a result, the dikes of the main canals have worn off to such an extent that the free-board is not more than 10-20 cm in some places. Running the irrigation system at full capacity for more than a few days becomes increasingly hazardous because dikes' resistance to water pressure is reduced. Breaches of dikes are becoming more frequent and have occa- sionally enforced a lowering of the water level in the canal system at key periods of the growing cycle (either in response to actual breaches or because of threatening breaches). 4.03 Canals, in particular drainage canals, have not been kept free from weed infestation; this had added to problems resulting from insufficient capacity of drains or flaws in the design of entire drainage systems (para. 4.07 and 4.08). Farmers are responsible for maintaining terminal canals but many of them have been negligent in this duty. As from the 1977/78 campaign, the Office du Niger will retain 100 kg of paddy per ha as cautionary deposit which farmers will forfeit if maintenance of terminal canals is found to be deficient.  - 14 - 4.04 The Office du Niger points to lack of finance as the main reason for insufficient maintenance but it would seem that the cash position of the Office du Niger over the last 4 years would have permitted more maintenance than actually has been carried out; several operations, for instance clearing of drainage canals, could have been done by labor intensive methods. As a result of omitted maintenance, there has been, over the decades, a consider- able consumption of capital. A rehabilitation project aiming at replacing these assets would have to include detailed provisions ensuring a more sus- tained maintenance in the future. 4.05 Insufficient Levelling of Rice-Fields: This is the main technical factor hampering further progress in cultivation techniques and yields. Only some 11,000 ha out of 40,000 ha under cultivation have been adequately levelled, between 1958 and 1965, and even these perimeters need improvement because the levelling was done with a view to cotton cultivation, and the type of levelling required for rice is of a different type. The remaining areas have never been levelled sufficiently to allow proper water-control in the fields. This problem is particularly serious in the Kolongotomo sector, where the terrain is more uneven than further North, and has led to widespread infestation with wild rice and abandonment of some 8,000 ha in this sector, and 14,000 ha in the Office du Niger as a whole. 4.06 In fields without adequate levelling, farmers use excessive amounts of water without, however, being able to prevent the spread of weeds. Heavy water use aggravates drainage problems and retards harvesting and threshing as fields take longer to dry. Introduction of more efficient production methods, in particular line-sowing, the essential precondition for effective weeding, is delayed by these conditions, and recommended fertilizer use is rightly kept at not more than 50 kg/ha. 4.07 Drainage Problems: Several of the drainage canals were built for cotton cultivation. Since cotton needs less water than rice, drains were of insufficient capacity after the conversion of these lands to rice cultivation. The drainage problem is aggravated by two factors: (a) the insufficient levelling of land (para. 4.05), which causes settlers to use about 50% more water than required on level fields; and (b) the tendency of settlers to block drains in order to divert water to unauthorized fields ("hors casier"). There are about 6,000 ha of such fields. Alhough the Office du Niger occa- sionally fines settlers cultivating "hors casier", efforts to stamp out these clandestine activities are not pursued very actively. 4.08 Several of the drainage systems suffer from basic defects: - the Kolongotomo sector cannot be drained during the crucial months from September to December, because the Niger river, into which the sector drains, is at a higher level than the drainage canal;  - 15 - The Kouromari systems drains into the third reach of the Fala de Molodo; however, in periods of heavy discharge the Fala de Molodo backs up its water towards the Kouroumari, thus obstructing the proper drainage of this sector. In both cases, new solutions have to be found and implemented. 2. Farm Structure 4.09 Excessive Size of Holdings: The average holding is 8.5 ha, or 0.8 ha per inhabitant. The more relevant ratio is 3.5 ha per active male (15-55 years), because at least two thirds of field work is carried out by men. At this land-labor ratio, labor bottlenecks arise at various stages: - at ploughing, harrowing, and sowing, which results in delayed sowing and important losses in yields, and - at harvesting and threshing, which results in severe quality losses through cleavage of the grains as a consequence of paddy remaining too long in the fields. 4.10 The bottlenecks are bound to become more severe as improved culti- vation techniques, requiring more labor per ha, are introduced. A reduction in farm size should therefore accompany the improvement of land. To ensure a satisfactory cultivation intensity, holdings should probably be cut by half, but in that case settlers would, even with substantially higher yields, suffer a loss in total net income, which would have detrimental effects on their participation in intensification efforts. Although it is desirable that the valuable asset represented by the irrigable land be used as intensively as possible, it should also be remembered that labor is, in Mali, a scarce resource, and in the long run only attractive returns to labor will ensure full use of those land resources. The Office du Niger recommends a'prudent approach to this problem and suggests that, as a first step, holdings should not be reduced below the ratio of 2-2.5 ha per active male person. 4.11 Discussion of the optimal size of holdings should take into account that there is a considerable dispersion of farm sizes: - 35% of them (with 17% of the cultivated area) have less than 6 ha, while - 5% of holdings (with 16% of the cultivated area) exceed 20 ha. There seems to be ample scope for increasing the labor-intensity by first reducing the size of these large holdings. It is desirable, however, to first collect more information about the relative efficiency of large and  - 16 - small holdings in the Office du Niger. Feasible reductions in the size of holdings would be one of the main topics to be discussed at appraisal of a Rehabilitation Project. 4.12 Underequipment of Settlers: The average equipment of settlers is presently: - one pair oxen for 5.5 ha, - one plough for 6 ha, and - one harrow for 10 ha. This is short of the desirable ratio, although the shortfall is not drastic. However, some 20% of settlers lack part or all of the most elementary equip- ment (Annex 1, Table 19). They rely on better equipped farmers to carry out ploughing and harrowing operations for them. This gives rise to income transfers increasing the inequality between settlers. More importantly, since underequipped farmers are served only when owners of equipment and oxen hav-e attended to their own needs, serious delays in ploughing and sowing are the consequence, with the well known impact on yields. 4.13 The Office du Niger has made several attempts, over the last 5 years, to supply underequipped farmers with supplementary equipment and oxen but these efforts have not met with success. It appears that many of the beneficiaries immediately resold the equipment received on credit in order to meet other obligations. No decisive action has been taken against these farmers by the Office du Niger administration. Indeed, it appears that the Office du Niger, since 1971, has used its authority to evict unsatis- factory settlers too sparsely, rather than too liberally. 4.14 The Office du Niger is presently considering to establish equipment centers in the cooperatives, which exist at the level of the Production Unit (covering several villages), and renting equipment to underequipped farmers. This approach has little prospect of success as the cooperatives, all through the life of the Office du Niger, have had a record of sterility and life- lessness. 4.15 Weak Settler Participation: The settler population has, so far, not evolved beyond the role of a silent partner in the direction of the Office du Niger's affairs. As mentioned above, the cooperatives play no active role, and direct participation of settlers in operations like market- ing, credit administration, etc. is hampered by the very low rate of literacy. More determined efforts could be made by the Office du Niger to organize or support adult literacy programs and, at a later stage, to involve settlers in certain activities which at present tie up extension staff's time. 4.16 In the same vein, the Office du Niger could support or encourage community development activities in the villages. Houses are supplied by the Office du Niger and remain its property; maintenance is the occupants' responsibility but is carried out poorly in many instances. Ways should be explored to give settlers a stronger sense of commitment and an incentive  - 17 - to improve their social environment at the family and the village level. At present, the appearance of many villages does not reflect the income level enjoyed by Office du Niger settlers, which is high compared to most rural areas in Mali. 3. Agro-Industrial Activities 4.17 Limited Rice-Milling and Storage Capacity: The Office du Niger has 4 rice-mills with a capacity of 66,000 tons of paddy at most. In 1976/77, some 65,000 tons were marketed. Moreover, of the four mills, two are very old and one, although only ten years old, is also worn out; only the fourth, which started operations in 1977, is in good condition. Maintenance of rice-milling equipment seems to be insufficient. Given the state of milling equipment, breakdowns are a constant threat. If marketed production continues to in- crease, there will very soon be a serious bottleneck in miling. 4.18 With the Italian manufacturer, the Office du Niger has negotiated a contract for the overhaul of the Molodo rice-mill, including an increase in its capacity from 19,000 tons to 30,000 tons. The works are scheduled for 1978/79 and will cost close to FM 350 million (US$700,000); the rehabilita- tion will be financed from the Office du Niger's own resources. (The rela- tively low costs are explained by the fact that some costly parts of the original equipment need not to be replaced.) Although this project will help to reduce the risk of breakdowns and to expand milling capacity by some 15%, a substantial further increase in milling capacity is required by the early 1980s. 4.19 Paddy storage capacity is presently 41,000 tons and is also stretched to the limit in some areas while some spare capacity exists in Kolongotomo. Lack of storage at the mill will entail storage in the field, with consequent losses in yield (through shedding) and quality (through cleavage). Additional storage capacity of 15-20,000 tons is needed in the near future. 4.20 Labor Problems in Sugar Cane Harvesting: The Office du Niger used 7,300 laborers in 1976, even before the Siribala sugar factory had started full production. The number of laborers presently employed at sugar cane harvesting and loading is not known to the mission. Recruitment problems have occurred from the beginning, in spite of piece-rate remuneration which makes it possible for able-bodied men to earn more than FM 1,000 per day, according to Office du Niger officials. 4.21 The Office du Niger is now considering mechanization of cane harvesting and loading operations since delays in transporting cane to the factory reduce the sugar yield of cane, and may be partly responsible for the mediocre performance of both mills in this respect. The economics of mechanizing field operations and selection of the most appropriate methods require careful examination. The Office du Niger is about to purchase some mechanical cane-loading equipment with finance provided by Saudi Arabia.  - 18 - 4. Management and Organization 4.22 Lack of Commercial and Economic Know-how: The Office du Niger has developed in the ambiance of the Malian public sector, where state enterprises deal primarily with other state enterprises and Government agencies. Nego- tiated price schedules (baremes) regulate the exchange of goods and services between these entities, and between them and the outside world. There is normally no marketing problem as buying agencies absorb total marketed pro- duction (rice, sugar). Thus, there is no scope for price policy, and cost accounting serves mainly the purpose of controlling expenditure, and of under- pinning bargaining positions in bareme-fixing negotiations. The importance of commercial skills and an understanding of economic issues became apparent when the Office du Niger stepped out of the public sector circuit to sell fattened cattle on the private market; with arbitrarily fixed internal accounting prices of by-products and overheads distributed in a schematic way, the Office du Niger has priced itself out of the market and closed down a side-activity well suited to make use of the by-products from processing rice and sugar. 4.23 In a more general sense, pricing of agricultural by-products is not based on economic considerations; by-products are made available to the alcohol distillery, to feedlots, and to settlers at very different prices. The importance of pricing these by-products according to economic opportunity costs seems not to have been fully appreciated. 4.24 Lack of Management and Planning Information: The lack of commercial and economic know-how is only an outflow of the more fundamental problem that the Director General lacks basic management tools to make operational decisions based on relevant indicators. Analytical accounting has been attempted but without operationally useful results. Management relies on statistical indicators produced not by the accounting services but by the Bureau des Affaires Economiques. The accounting, budgeting and reporting systems of the Office du Niger should be thoroughly reviewed in order to ensure that demands of management are properly met. This will become in- creasingly important as the Office du Niger, after rehabilitating its present infrastructures, plans to expand and diversify its activities, which requires a more detailed knowledge of alternative costs and returns. 4.25 Shortage of Engineering Capacity: Since development works phased out in 1965, the Bureau d'Etudes Generales, the Office du Niger's Bureau of Technical Studies, has seen its engineering staff drastically reduced: pres- ently it consists only of its Head, who is a senior engineer, three junior engineers, some draughtsmen, and five surveyor brigades. It is understaffed even to carry out the limited functions of overseeing current operations. Few of the rehabilitation and expansion works listed in the Five Year Plan have been worked out with the detail normally required by sources of external finance. If these works are to be carried out in the near future, an imme- diate strengthening of the Bureau d'Etudes Generales is necessary.  - 19 - B. Development Priorities 4.26 The Office du Niger has performed a remarkable feat in pulling itself out of the dismal situation in which it found itself in the late 'sixties, and it should be noted that (except for the development of sugar production) this was accomplished without external financial or technical' assistance. However, the level of yields obtained in rice production (2,250 kg/ha) is still very modest for an irrigation system with full water-control. As long as yields have not been increased to a level of 3.5-4.0 t/ha, it will be difficult to advocate and justify expansion in the irrigable area involving investment estimated at not less than US$4,000/ha. 4.27 The mission recommends, therefore, that before any of the expansion and crop diversification projects included in the Five Year Plan (para. 3.13) are undertaken, - rehabilitation of infrastructures, and - intensification of agricultural production should have priority for a period of not less than 5-8 years. In this assess- ment, the mission finds itself in agreement with management of the Office du Niger and Government authorities. 4.28 The mission also recommends that a rehabilitation and intensifica- tion effort should concentrate on rice, - because consolidating and expanding rice production has priority in Government objectives; and - because rice is, in spite of sugar's ascendance in terms of sales, the basic and characteristics crop of this irrigation scheme. It would be prudent, however, to prepare the ground for future crop aiversi- fication efforts as early as possible (para. 4.31). 4.29 The two main components of a rehabilitation program would be: - repair of the Markala dam and strengthening of the feeder canal, the two main canals, and the entire water distribution and drainage system; this is urgently required in order to prevent disruptions of the irrigation processs and to ensure that the irrigation system can be run at its full capacity and with the desirable elasticity; - the levelling and general reshaping of rice fields; as explained in the preceding pages, this is the essential precondition for introducing more efficient and intensive rice cultivation methods. Both elements are closely interdependent.  - 20 - 4.30 Since the P.R. of China has agreed to finance the reparation of the Markala barrage, realignment and repair of the feeder canal, and reha- bilitation of primary and secondary canals in the areas commanded by the Canal de Macina, the mission recommends that IDA help prepare a rehabilitation program covering the remainder of the area, i.e. the entire system commanded by the Canal du Sahel (75% of the cultivable area developed in the Office du Niger). Content, impact on agricultural production, financial implica- tions, and economic justification of such a program will be outlined in the next chapter. 4.31 The experience of the 'sixties has demonstrated not only the prob- lems involved in growing cotton at the Office du Niger but also that cotton can succeed if certain conditions are met. As Mali emerges from the period of rice deficits, a new look at irrigated cotton cultivation under appropriate conditions seems to be timely. While a rehabilitation program addressing itself mainly to the problems of infrastructure is carried out, long term expansion and crop diversification plans should be studied from the technical and economic point of view within the framework of a Master Plan. Some of the more time-consuming of the studies, surveys and research programs required as inputs for this exercise, should be initiated as soon as possible. V. A Rehabilitation Program 5.01 The rehabilitation works outlined below cannot be completed within the time-span of a normal Bank project period, which is 4-6 years. Therefore, the term Program is used in the following to designate the whole of these rehabilitation activities, which would extend over two project periods. This chaper deals with the entire Rehabilitation Program. A. Description of the Rehabilitation Program 5.02 The proposed Rehabilitation Program would be limited to the area commanded by the Canal du Sahel/Molodo system and consist of the following components: - Rehabilitation of the infrastructures, i.e. Canal du Sahel, main canals, primary canals (distributeurs), secondary canals (partiteurs), and drainage canals; works would comprise strengthening and increasing the free-board of dikes, dredging of canals and widening of canals or drains wherever necessary, and repair of structures. Improvement and construction of service roads for maintenance works would also be included.  - 21 - Levelling of some 31,700 ha of rice fields in the Canal du Sahel system, in the first place those not covered by the levelling operations of the early 'sixties (but including also a reshaping of these fields, the levelling of which does not correspond to the requirements of rice cultivation); this program would also comprise the reclamation of 5,700 ha that have been abandoned in the Canal du Sahel command area. Technical assistance to strengthen administrative, agri- cultural and technical services (in particular operation and maintenance), including training components wherever necessary. Procurement of appropriate maintenace equipment. Preparation of a Master Plan for the long-term expansion and crop diversification of the Office du Niger. Support for agricultural research and trial programs preparing crop diversification, in particular for cotton, wheat, sorghum, and fodder crop cultivation, and Support for adult literacy campaigns and community development programs, actions designed to strengthen the participation of settlers in the management of the scheme. This report will deal primarily with the civil works aspects of the Program, which would absorb about 90% of the costs. Works to be carried out, their estimated cost, and a tentative implementation schedule are shown in Annex 4, Table 1. 5.03 Total cost of rehabilitating infrastructures of the Canal du Sahel system and of on-farm works to improve 37,000 ha of rice fields, is estimated to be US$43 million in prices of early 1978. 1/ Physical contigencies amount- ing to 25% of base cost have been included in this sum and signal the very approximate nature of these estimates, which will be refined in preparation work to be done over the next two years (Chapter VI). Cost estimates and implementation schedules have been established on the assumption that works would be carried out by force account. The technical and organizational ability of the Office du Niger's Works Department to execute a program of this order of magnitude will be examined, and put to a practical test, during the proposed Technical Assistance/Engineering Project (Chapter VI), which will also serve to strengthen the Works Department and to assess further assistance and training needs for the execution of the Rehabilitation Program. 1/ On the basis of expected price increases and the indicative implementa- tion schedule shown in Table 1 of Annex 4, total cost in current prices would be US$80-85 million.  - 22 - 5.04 The Rehabilitation Program raises no problem of international water rights as no new areas would be developed, and the rehabilitation works would even lead to a substantial reduction in water use per hectare. B. Expected Impact on Production, Markets, Employment and Incomes 1. Production 5.05 Improvement of infrastructures and the levelling of perimeters will permit to expand paddy production significantly because - better water control will facilitate the introduction of better cultivation techniques (line-sowing, weeding by cultivator) and allow higher fertilizer doses; and - reclamation of 5,700 ha of abandoned land will permit an increase in cultivated area in the Canal du Sahel system by 17%. 5.06 Assumptions regarding cultivation techniques, fertilizer use, and adoption rates are spelled out in Section II of Annex 4. It has been assumed that the majority of farmers (60%) reach yields of 3.50 t/ha within four years after improvement of their land, while 30% would reach 4.00 t/ha, and 10% only 3.00 t/ha. On the basis of this, paddy production in the Canal du Sahel system would increase by 58,000 tons over 12 years from the beginning of the Rehabilitation Program. Of this increase, some 50,000 tons would be marketed since settlers withhold home-consumption needs from existing production, and only consumption requirements of new settlers need to be deducted. The present volume of marketed production is 65,000 tons. 2. Markets 5.07 It is projected that Mali, without the Program, will produce a rice surplus of 5-8% of domestic requirements until about 1984, but only in years with satisfactory rainfall and flood levels. This theoretical surplus posi- tion would be reinforced and prolonged by not more than 2 years, as the Program would come on stream at a time when the surplus existing without it, would begin to taper off (Table 3 in Annex 4). Fluctuations in the instable Malian weather conditions may cause shortfalls in production well beyond the magnitude of this theoretical surplus and are almost certain to do so at least in one or several years, as demonstrated again in 1977/78. Therefore, the temporary surplus is better viewed as a welcome buffer against the effect of droughts. It is assumed hereafter that incremental production will be absorbed by domestic demand; if a surplus really materializes in the early 'eighties, it will be either exported to West African countries or accumulated for a reserve stock.  - 23 - 5.08 The projection of demand (Table 3) indicates that even with pro- jections which Government regards as too conservative, demand would exceed domestic supply after 1987. This would justify initiating an expansion in the irrigated area towards the end of the Rehabilitation Program, for instance simultaneously with its second stage (scheduled for 1986-90). 3. Employment 5.09 The Program would provide additional employment for settler families from two sources: - the assumed reduction in average farm size from 8.5 ha to 6.5 ha would provide settlement opportunities for 1,150 new families; and - the reclamation of 5,700 ha would allow to increase the settler population by another 850 families. The total employment effect would thus be 2,000 families or 21,000 persons (on the basis of present family size). After completion of the Rehabilitation Program, one family out of three in the Canal du Sahel system would be new. 4. Income of Settlers 5.10 At present, yield levels vary between 1.5 t/ha and 2.7 t/ha, dif- ferences reflecting the state of infrastructures as well as the aptitude of farmers. Although there would be no strict correspondence, it has been assumed that those settlers who presently obtain higher yields would also be among the 30% achieving 4.0 t/ha eventually (para. 5.06), while settlers who now obtains low yields (as well as some of the new settlers) would be more numerous among those achieving only 3.0 t/ha. Under these assumptions, income per family from rice cultivation would increase from FM 320-570,000 at present to FM 480-700,000 after rehabilitation of infrastructures and intro- duction of improved techniques. Farm budgets are at Annex 4, Section III. Income per ha would increase more than total income per family since farm size is assumed to be reduced from 8.5 ha to 6 or 7 ha. Income projections are based on 1977 producer prices (FM 45/kg) and an increase of the development levy from 400 kg to 600 kg of paddy per ha; this increase is envisaged by the Office du Niger for the holdings that have undergone the planned improvements. 5.11 Remuneration per man-day would increase by only 10% on average because of the incremental labor requirements associated with intensification of cultivation methods. However, returns per incremental man-day, which is the more relevant concept, would be between MF 800 and MF 1,100 (Table 8), well above the average opportunity cost of labor and even above the price of farm labor at times of peak demand.  - 24 - C. Financial Implications 1. Office du Niger 5.12 Incremental charges for the Office du Niger would comprise main- tenance costs for the rehabilitated infrastructures and some incremental cost of extension staff for the additional settler families. 5.13 Adequate maintenance of rehabilitated infrastructures would require some FM 20,000/ha according to preliminary estimates. At present, the Office du Niger spends only some FM 6,000/ha (para. 4.02), but insurances would be sought at appraisal of a Rehabilitation Project that the Office du Niger would carry out maintenance according to guidelines to be agreed upon. 5.14 Incremental costs to the Office du Niger would be 31,700 ha x (FM 20,000-6,000) plus 5,700 ha of reclaimed land x FM 20,000 = FM 558 mil- lion annually, after completion of all rehabilitation works. Incremental cost of extension (staff and operating expenditure) is estimated at FM 56 mil- lion (Table 12 in Annex 4). Total incremental cost is thus FM 612 million annually. 5.15 As a consequence of the Rehabilitation Program, the Office du Niger obtains supplementary revenue from three sources: - increased levies from rehabilitated areas (600 kg/ha instead of 400 kg/ha); - the levy of 600 kg/ha on the 5,700 ha to be reclaimed; and - a provision for overheads of FM 3.6 per kg of paddy marketed included in the rice marketing price schedule (1977/78 campaign used as reference). For all other items of the price schedule (Table 9) it will be assumed that they will be absorbed by increases in actual cost (for collection, transport, milling, etc.) although the Office du Niger may enjoy some economies of scale as a consequence of the expansion in output and sales. Only the overhead provision of FM 3.6/kg is regarded as a net gain in revenue. 5.16 At the 1977/78 producer price of FM 45/kg, incremental revenue will eventually be - MF 285 million from increasing levies on presently cultivated land; - MF 154 million from levies on the 5,700 ha to be reclaimed; and  - 25 - MF 180 million from overhead reimbursements under the rice marketing price scheduled (assuming 50,000 tons of paddy to be marketed). Total incremental income is FM 619 million, which is very close to the esti- mated incremental recurrent cost of FM 612 million. 5.17 Full maintenance expenditure would become necessary only as from the fourth year after completion of works in any given area; as it is assumed that projected yields will be attained also after four years of cultivation on improved lands, incremental revenue and incremental costs would accrue roughly at the same rate. 2. Government 5.18 It is expected that the Rehabilitation Program will be financed with foreign assistance on concessional terms. For a productive investment like this one, it would be appropriate for Government to on-lend the proceeds of a foreign loan or credit to the Office du Niger at harder terms which reflect, at least approximately, the opportunity cost of capital. However, at prevailing producer prices, the Office du Niger would have no incremental income from which to pay, in addition to incremental recurrent costs, debt service charges. The Office du Niger's debt servicing capacity is entirely a function of the producer prices, which are negotiated with other parastatal agencies but which are, ultimately, fixed by Government. 5.19 In 1977, the producer price of paddy (MF 45/ha) was nearly identical with the import substitution price. The world market price of rice is pro- jected to increase substantially within the next three years and is expected to correspond to an import substitution price of paddy of MF 86/kg (in prices of 1977) for the 1980-85 horizon. From this, the following options can be derived for Government: - if Government, following its present policy of keeping food prices for urban consumers as low as possible, maintains the 1977 producer price in real terms, the Office du Niger will not be able to service any loans or credits. Government, however, would save substantial budgetary resources on subsidies for rice imports substituted by the Program; - if Government would increase the producer price in line with the projected import substitution price of paddy, the Office du Niger would have more than ample capacity for repaying the investment, even at commercial rates of interest.  - 26 - It follows that Government can also choose an intermediate course, allowing the producer price in real terms to increase at such a rate as to enable the Office du Niger to repay the investment according to terms to be agreed upon. Assuming that the on-lending terms stipulate repayment over 30 years at 10% interest, the required producer price level would be in the neighbor- hood of MF 60/kg (in prices of 1977). 5.20 Increasing the price of rice to such an extent as to enable the Office du Niger to repay investments at rates reflecting the opportunity cost of capital is preferable from an economic viewpoint and would contribute to a more equitable distribution of income between urban and rural populations. The twin issues of on-lending terms and producer prices would be important topics to be discussed at appraisal of a Rehabilitation Project. D. Economic Justification 5.21 The benefits of the Rehabilitation Program would be manifold: - it would halt and reverse the progressive deterioration of key infrastructures; - it would substantially increase the share of national rice production which is drought-proof; - it would create for 2,000 additional families income- earning opportunities well above the rural average in Mali; and - it would lay the basis for future expansion and crop diversification through the strengthening of the Office du Niger's organization, through the establishment of a Master Plan, and through support for agricultural research and trial programs. 5.22 Not all of these benefits can easily be quantified; given the pre- liminary nature of cost estimates, even the economic rate of return from incremental paddy production can only show likely ranges, and, which is perhaps more instructive, affordable expenditure per hectare. Principles of cost allocation, assumed development with and without the Program, valua- tion of incremental labor inputs, and treatment of incremental maintenance and extension cost are discussed in Annex 4, Section IV. 5.23 The economic rate of return of the project would be 14% under the assumptions spelt out in Annex 4. Given the low degree of precision of cost estimates the main conclusion is that total cost (in 1977 prices) ought not to exceed US$43 million by much if an acceptable rate of return is to be maintained.  - 27 - 5.24 Rehabilitation of the Markala barrage and of the main feeder canal is scheduled to be carried out, with assistance from the P.R. of China, before the proposed Rehabilitation Program would begin. These expenditures are, therefore, regarded as sunk costs for the purpose of this Program. However, even if a share of these costs proportionate to the area commanded by the Canal du Sahel were allocated to the Program, total cost would increase by less than 10%. 5.25 The project is not very sensitive to changes in costs and benefits or to delays in deriving the full benefits from the rehabilitated areas, as shown below: Parameter Change Rate of Return (%) Base estimate 14 Benefits -10% or Costs +10% 13 " -20% " " +20% 12 " -30% " " +30% 10/11 Benefits +10% " " -10% 16 " +20% " " -20% 17/18 " +30% " " -30% 18/20 Benefits Delayed 1 year 13 it "1 2 years 11 it If 3 years 10 E. Conclusion 5.26 In view of the facts that - technical preparation of most of the rehabilitation works remains still to be done; - the Bureau of Technical Studies of the Office du Niger is heavily understaffed; - the methods to be applied for rehabilitating rice-fields remain to be tested from the technical and economic point of view; and - there is a general need to strengthen the Office du Niger staff and puts its performance to a test, the mission proposes that the Rehabilitation Program be preceded by a Technical Assistance/Engineering Project, in the course of which the documents and information required for the appraisal of a Rehabilitation Project would be prepared and the Office du Niger would be assisted in mobilizing for its subsequent implementation.  - 28 - VI. Proposal for a Technical Assistance/Engineering Project 1/ A. Summary Description 6.01 The main objective of the proposed Technical Assistance/Engineer- ing Project would be to help the Office du Niger to prepare a Rehabilitation Project along the lines indicated in Chapter V and to strengthen central management services. The Project would consist of the following components: - Technical assistance for key departments of the Office du Niger, i.e. the Office of the Director General, the Bureau of Technical Studies, and the Works Department, as well as short-term consultancies; - Civil works equipment to carry out urgent repair and strengthening works on irrigation infrastructures and to implement a 1,500 ha pilot program of land levelling, as well as operating cost (excl. staff) for these programs; - Sundry topographical and hydrological instruments, office equipment, vehicles for technical assistants, and spare parts and tools for the mechanical workshops of the Office du Niger; - Support for agricultural research and trial programs concerning rice, cotton and fodder plants; - An aerial photographic survey of the Office du Niger area; - A socio-economic study of the situation and aspirations of the settler population, and of their relations with the Office du Niger; - An audit of the Office du Niger's accounts by an auditing firm of international standing; and - Travel scholarships for Office du Niger engineers to study water management methods in other irrigation schemes. 6.02 The project would start in late 1978 and extend over 3 years. Preparation of a Rehabilitation Project would be scheduled with a view to appraisal after the second year of the Technical Assistance/Engineering Project. 1/ This proposal has been discussed with, and accepted by, Government. A Technical Assistance/Engineering Credit "Office du Niger" is under preparation and is scheduled to be presented to the Board of the World Bank in the third quarter of 1978.  - 29 - B. Detailed Features 1. Technical Assistance 6.03 At the Office of the Director General, there would be one high-level management consultant from a firm of international standing. Ris main respon- sibility would be to design and implement improved accounting and management information systems. One of the partners of the consulting -firm would assist in determining, together with the Director General, the overall direction of the firm's interventions and would continue to monitor progress in implement- ing the works schedule agreed upon. The resident consultant would also draw on the firm's specialists in various fields, who would visit the Office du Niger for short missions, as required. (For details see Annex 5, Section I). 6.04 Three engineers would be assigned to the Bureau of Technical Studies (Bureau d'Etudes Generales) to assist its head and his team of Malian engineers in preparing the feasibility study as well as designs and tender documents for a Rehabilitation Project. (a) a senior engineer would assist in overall planning anid coordination of special studies and ensure that project and tender documents are prepared according to inter- national standards; (b) a hydraulic engineer would assist in surveying the present state and capacity of the irrigation network and advise on ways and means for rehabilitating the system and increasing its capacity and flexibility; (c) a design engineer would assist in the preparation of the Rehabilitation Project, i.e., the feasibility study, detailed designs, and specifications for tender documents.. These engineering services would preferably be obtained from a firm of Consul- ting Engineers, which would allow the resident engineers to draw on expertise from their home base for short-term assignments, as required. Functions and responsibilities of the resident engineers would be defined in a contract between the Office du Niger and this firm under terms and conditions accept- able to IDA. (For details see Annex 5, Section II). 6.05 Government should undertake to appoint not less than three additional Malian engineers to the Bureau of Technical Studies before the beginning of the Project. Without such a strengthening of its staff, the Bureau would not be able to carry out the scheduled preparation work, or only over a much longer period of time. Also, the Malian engineers would profit from collaborating closely with three experienced engineers. The mission proposes that appoint- ment of Malian engineers to the Bureau of Technical Studies be made a condi- tion of negotiation of the Technical Assistance/Engineering Credit.  - 30 - 6.06 The Works Department would be assisted, during the three years of the proposed pilot program of land-levelling, by an experienced civil works engineer specialized in land-levelling operations and with experience in cost monitoring. Another engineer would act as technical inspector of mechanical equipment. He would assist in organizing the efficient use and maintenance of equipment and prepare tender documents for the civil works equipment to be procured for the subsequent Rehabilitation Project. (For details see Annex 5, Section III.) The two engineers would be engaged through the same firm of Consulting Engineers (para. 6.04) for the duration of the improvement campaigns only, i.e. about 6 months annually. 2. Civil Works Equipment and Operating Cost 6.07 Civil works equipment and operating cost (excluding local staff) would be financed for the following purposes: (a) To carry out an experimental program of land levelling and general improvement of rice-fields under different topo- graphical conditions in order to establish the most cost- effective methods and the most suitable equipment to be used on a large scale in the ensuing Rehabilitation Project; the pilot program would also be used to train engineers, surveyors, and machine operators to carry out these works effectively, and serve as a demonstration device for settlers. About 1,500 ha would be covered over three years. (b) To repair and strengthen critical points of the irrigation infrastructures, in particular dikes of main canals, and drains; these works would give greater flexibility to the operation of the irrigation system, pending its general overhaul in the Rehabilitation Project. 6.08 The equipment required for these works would be procured by inter- national competitive bidding. A consulting engineer's services have been secured, with financing (US$20,000) provided under the Project Preparation Facility, to define the equipment needs and help the Office du Niger techni- cians to prepare the tender documents according to the standards required for IDA financing. 6.09 Some minor equipment and instruments would be needed for topo- graphical work, hydrological measuring devices, etc. Office equipment, files, draughting and reproduction equipment would also be provided for as well as a vehicles for the resident technical assistants. In order to increase the efficiency of the Office du Niger's existing civil works equipment, the project would also finance the purchase of a stock of tools and spare parts which will be determined with the assistance of a second consultant engaged for this purpose under the Project Preparation Facility (para. 6.08).  - 31 - 3. Agricultural Research and Trial Programs 6.10 In order to prepare the ground for the diversification of the Office du Niger's activities along the lines indicated in the Five Year Plan, the mission proposes to support agricultural research and trials on several crops. Details are at Section IV of Annex 5. 6.11 Rice research at the Kogoni station needs little assistance; the location is well suited to rice research and research staff is competent and sufficient. Some supplementary agricultural machinery would be needed, however, and this would be provided under the project. 6.12 Cotton production was phased out in 1970 because of technical problems and because rice production was given top priority. After rehabili- tation of the infrastructures, there is no reason why cotton production should not succeed, as it did in important sections of the Office du Niger before 1970, provided that cotton is grown in the areas of low rainfall and if, in particular, cotton is kept strictly separate from rice production in order to avoid the problems experienced in the past. 6.13 Cotton research needs to be relocated from its present unsuitable site at Kogoni. The mission proposed to transfer cotton research to the Alatona sector, on the right bank of the Fala de Molodo, and to develop a 20 ha trial area with water derived from Head No. 2 of the Fala de Molodo. Research would be directed, by the present staff, from the Kogoni Station where all basic facilities would continue to be located. 6.14 This proposal was rejected by the Government and the Office du Niger for technical reasons. At the request of Government, a hydrological survey of the Mema area, where Government hopes to develop irrigated cotton production, has been included in the project (contained in the short-term consultancies mentioned in para. 6.04). 6.15 The mission also proposes a small experimental program with irri- gated fodder production at the village level. In three different areas, a block of 20 ha would be developed for rotational grazing of some 100 heads of cattle in order to study the technical and economic feasibility of such an approach on a larger scale and to test farmers' response. For details see Annex 5, Section IV. 6.16 In order to accelerate the re-opening of the two feedlots closed down in 1977 (para. 3.12), a study of the economic and organizational aspects of this branch of the Office du Niger's activities will be undertaken, in- cluding a study of the actual and potential uses of the Office du Niger's agricultural and industrial by-products (molasses, sugarcane tops, bran, rice-meal, etc.). This study will also be financed under the project (Annex 5, Section IV).  - 32 - 4. Other Items Aerial Photographic Survey 6.17 In preparation of the long term planing exercise (Master Plan)- to be undertaken during the Rehabilitation Program, an aerial photographic survey of the Office du Niger system and of the immediately surrounding areas should be undertaken, the last survey having been executed in 1968. Funds for such a survey would be provided under the Project. Socio-Economic Study 6.18 In order to enable management of the Office du Niger to approach the difficult questions of structural change, which lie ahead, a socio- economic study would be commissioned to the Institut d'Economie Rurale; this study would analyse, under terms of reference to be agreed upon, the social environment of settlers inside and outside the Office du Niger, their motivations, social values, and their attitude toward the Office du Niger (Annex 5, Section VI). Audit 6.19 Following the clarification of legal and accounting issues regarding its assets, the Office du Niger plans to establish accounts of its operations for the years 1972-1977. In order to facilitate the contracting of the external financial assistance required for the Rehabilitation Program, these accounts ought to be audited by an auditing firm of international standing before 1980. The Project would provide financing for such an audit and for assistance by the auditing firm in preparing these accounts according to international standards. (Details are at Annex 5, Section VII.) Study Travel 6.20 The Technical Assistance/Engineering Project would in itself contain an important element of on-the-job training in the fields of technical studies and design, execution of works, accounting and general organization (stock management, etc.). In addition, the project would provide funds for study travel of Malian engineers to other irrigation projects, preferably in Africa; this would permit them to study water management methods and other features of these projects. C. Cost and Financing 6.21 Project costs net of taxes are estimated at FM 2.25 billion (US$4.6 million), of which 90% are foreign exchange. Project cost including taxes would only be slightly higher as major project components (technical assis- tance, agricultural equipment) have no or low tax rates, and the Office du Niger is exempt from fuel taxes.  - 33 - 6.22 IDA would finance US$4.0 million or 87% of project cost; the remainder would be shared by Government and the Office du Niger according to criteria to be agreed upon; it should be taken into account that the Office du Niger would pay local staff engaged in project activities and provide technical assistants with offices; these items are not included in the cost of the Project. 6.23 The IDA credit for the Technical Assistance/Engineering Project would be on standard terms. In view of the Credit's predominant technical assistance character, it would be appropriate for Government to pass on the proceeds of the Credit, to the Office du Niger and to the research institu- tions concerned, as a grant. D. Benefits and Risks of the Project 6.24 The Project would increase the technical and managerial capacity of the Office du Niger and ensure that the important Rehabilitation Program is prepared according to standards required for external financing. At the same time, technical staff would be trained to execute a first Rehabilitation Project with the necessary cost-effectiveness. 6.25 For IDA, the Technical Assistance/Engineering Project would provide the occasion to observe the Office du Niger's performance in various fields, assess assistance and training requirements (if any) for an ensuing Rehabili- tation Project, and decide whether and when such a project can be appraised. 6.26 Finally, it is hoped that strengthening the Office du Niger organi- zation and increasing thereby its absorptive capacity would encourage other sources of external assistance to co-finance the Rehabilitation Project and to assist other priority projects in the Office du Niger (see Chapter VII below). 6.27 The main risks of the Project are - whether suitable consulting firms can be found to carry out this demanding technical assistance assignment; and - whether the Office du Niger, with 15 years of unassisted operation behind it, will be able and willing to make good use of the technical assistance provided. The Bank would help the Office du Niger to define terms of reference. If con- sultants are of the required high caliber, the risk of them not being fully used by the Office du Niger will already be much reduced. Furthermore, the fact that the Office du Niger, after a long period of seclusion, has requested Bank assistance, suggests that its management is also willing to make use of the technical expertise provided thereby.  - 34 - 6.28 There is an additional risk that the project will not lead to the expected rehabilitation program. This risk seems slight, however, assuming that the technical assistance is of a high caliber and is properly used, and given the high potential of the Office du Niger, the commitment of its staff, and the interest shown by other sources of external assistance. VII. Suggestions for Other Projects and Studies 7.01 At various instances in this report, reference has been made to other projects that need to be prepared or implemented, or studies that need to be undertaken in the near future. Since this report is scheduled to be distributed to, and eventually discussed by, the CILSS working group on irrigation, several project ideas and studies which Government may wish to bring to the attention of the CILSS working group, are briefly discussed below: Rice Milling and Storage 7.02 If the Molodo rice-mill is rehabilitated and expanded from 19,000 t to 30,000 t in 1978, as scheduled, this would give the Office du Niger some breathing space until about 1980/81 - but only if breakdowns in the mills of Kolongo and N'Dogofiry can be avoided. In view of the age of the Kolongo mill and the poor state of repair of the N'Dogofiry mill, this is highly uncertain. In any event, an additional mill will be required by the early 1980's if the rehabilitation program is carried out according to schedule and produces the anticipated results. An additional mill of some 20,000 t capacity should be planned and built (in the Niono/D'Debougou area) until that time. Estimated cost in 1977 prices: FM 1.2 billion (US$2.6 million). 7.03 As shown in Annex 3 (Table 13), storage capacity will become scarce when marketed production exceeds the 70,000 t mark (1976/77: 65,000 tons). Most of this would be required near the existing mills in the Molodo/Niono/ N'Debougou area, or next to the new mill to be established in that area (para. 7.02). The Office du Niger has entered into discussions with an Italian supplier but the price quoted for a 20,000 t store (FM 1.4 billion or US$3 million) is high and could probably be improved upon through inter- national competitive bidding. Road Infrastructure 7.04 Segou is linked with Niono, the central township of the Office du Niger, by a paved road up to the Markala barrage and by a laterite road of some 70 km linking Markala and Niono (and continuing for another 40 km to Kourouma). This road is heavily used throughout most of the agricultural year; the opening of the Siribala sugar factory and the proposed rehabilita- tion works will further increase road traffic density.  - 35 - 7.05 Improvement and pavement of the road Markala-Niono is under con- sideration for financing by the African Development Fund. Early construction of the road (in 1979-1981) would be highly desirable in order to ensure that on-going works and deviations do not obstruct the rehabilitation works ex- pected to begin on a large scale in 1981/82. 1/ 7.06 It would be desirable to start a feasibility study of two other main road sections in the Office du Niger in the near future, i.e. of the Niono-Kourouma and the Point A - Macina roads. If upgrading of one or both of these sections should prove to be economically justified, finance should be sought, and a tender launched, while the contractor executing the Markala- Niono contract is still on the spot; Mali may benefit from a low bid in that case. (If traffic on these roads is too light to justify major investments in the near future, a rapid reconnaissance survey of improvements of the laterite roads could be carried out, in the absence of other sources of assistance, on account of the short-term consultancies provided under the proposed Technical Assistance/Engineering Credit.) Canal de Costes 7.07 The Canal de Costes was conceived already in colonial times. It is to take off from Point A, between the Canal de Macina and the Canal du Sahel, and would run over 19 km to the Siribala area. This canal would have a short-term and a long-term function: (a) in the short run, the Canal de Costes would permit to substitute the pump stations at the Siribala and Dougabougou sugar plantations by gravity irrigation, thereby saving about US$0.5 million in annual pumping costs. Even more important, the canal would eliminate the constant risk of breakdowns in the pumping stations. (During the last campaign, Dougabougou experienced chronic difficulties with its pumps.) (b) in the longer run, the Canal de Costes will permit to develop the entire Kala Superieur, an area of about 40,000 ha suitable for rice and sugar-cane cultivation. 7.08 Construction of the Canal de Costes was envisaged under the current Five Year Plan but was delayed by lack of financial and technical means. In late 1977, however, the Office du Niger decided to reactivate a 25 year old bucket excavator ("Lubecker"), which has been idle for the last 15 years. Work on the Canal de Costes started in April 1978 off Point A and is proceed- ing slowly but steadily. The short-term objective of substituting gravity 1/ The mission is informed that the African Development Fund has agreed in early June to finance 65% of the cost of construction of this road and makes available a credit of Units of Account 8.5 million (US$9.35 million).  - 36 - irrigation for the pumping stationB in Siribala and Dougabougou could be achieved with a canal of some 15 m /sec. capacity; however, the Off'ce du Niger decided to dig the canal for its full design capacity of 55 m /sec, i.e. as big as the other two main supply canals. 7.09 It is estimated that - barring a major breakdown of the excavator - earth works can be completed in 1980. The Office du Niger will require financial and technical assistance for building the necessary structures, i.e. - head regulators at Point A; - two cross regulators for the two sugar estates; and - a tail-head regulator. The cost of these structures is estimated at FM 600 million (US$1.3 million). If a shipping lock were included, costs would rise to FM 1.3 billion (US$2.8 million). The Office du Niger proposes to build the structures without a lock since the economic advantages of shipping are reduced by the short distance from Point A and are unlikely to justify the incremental cost. 7.10 Financial assistance for these structures should be provided in the near future to avoid a delay in the completion of the canal. The question of the lock may warrant a rapid feasibility study, however, to make sure that the correct solution is adopted. Farm Equipment 7.11 As shown in Annex 1 (Table 19), there is a considerable number of settlers who lack the basic equipment (i.e. at least two oxen, one plough and one harrow). The Office du Niger has, in the past, made several efforts to improve the equipment ratio but these attempts have failed (Annex 1, para. 2.12). The Office du Niger now proposes to provide equipment to the coopera- tives, which would rent it to under-equipped settlers, thereby avoiding the problems previously encountered. 7.12 In 1977, the Office du Niger has drawn up an inventory of equipment needs and arrived at a total of FM 141 million (US$300,000), of which - oxen FM 103 million - ploughs FM 14 million - harrows FM 24 million. These figures do not include equipment needs of new settlers (several hundred per year, many of whom come without the equipment theoretically required for admission). Therefore, some FM 200 million (or USS$400,000) may be required for an effort to eliminate underequipment. Rowever, such a program should be preceded by a careful review of the institutional problems involved.  - 37 - Studies 7.13 In the course of the identification mission, several important issues have been found to require further study. Some of these can be dealt with during the short missions which would be provided for under the Technical Assistance/Engineering Credit. Other studies which remain to be funded,.are: (a) Water Use Study: Since the late fifties, no detailed ex- periments have been carried out, for various soil types and cultivation techniques, of the actual quantity of water used by rice during its vegetation cycle. Figures on which the present report as well as preceding studies are based, are only orders of magnitude. To gauge the capacity of the present irrigation system, the measurement of its discharge (to be undertaken under the proposed Technical Assistance Credit) must be supplemented by a more precise measure of water use. For the system as a whole, the difference between, for instance, a module of 2.2 and 2.5 1/sec/ha, can mean a difference in command area of 3,000 ha. Such a study would take about 2 years and cost about FM 100 million (US$200,000). (b) Survey of Right Bank Area: Simultaneously with the Rehabilita- tion Project, a Master Plan for the long-term development of the Office du Niger would be drawn up. This plan would weigh the relative economic merits of different crops and the suit- ability and development cost of possible expansion areas. Most of the eligible areas on the left bank of the Niger have been prospected in the early days of the Office du Niger, and topo- graphical and pedological data are available. In order to be able to assess expansion possibilities on the right bank, a pedological and topographical study of some 500,000 ha should be carried out at the reconnaissance level; existing information from other sources would also be reviewed. This project would require 2 years and would cost about FM 375 million (US$750,000). (c) Fisheries: There is substantial traditional fishing activity in the Fala de Molodo and the Fala de Boky-Were but its importance is unknown. There would be scope for initiating a project of assistance to fishermen (improved techniques of catching and preserving fish, etc.). The use of rice- meal and bran and its effect on productivity of fishing waters should be studied methodically. A study of these aspects is recommended. (d) Afforestation: A feasibility study on the costs and benefits of irrigated sylviculture in the Office du Niger should be carried out in collaboration with the research station which is about to start work in the area. The scarcity of trees in the area and the agglomeration of 50,000 settlers should  - 38 - make production of firewood and fencing poles a very profitable operation. Since lands that are marginal for crops would still be suitable for several tree species, the opportunity cost of land would be low. Special attention should be paid, however, to the risk of attracting weaver-birds (Quelia-guelia). (e) Social Projects: Villages in the Office du Niger do not reflect the relative ease in which many of the settler families live, and the Office du Niger administration has not been very active in promoting activities that could improve the quality of life and diversify economic oppor- tunities. A first prerequisite is the active support of adult literacy campaigns organized by the Direction Nationale de l'Alphabetisation Fonctionelle et de la Linguistique Appliquee (DNAFLA). Other aspects that merit closer study are: - the possibility of setting up health-care structures under the responsibility of the Office du Niger; - village improvement programs like those attempted in the neighboring Operation Riz Segou; - expanding the village blacksmith program developed in the Operation Arachide and the Mali Sud project, to the Office du Niger; and - the scope for a vegetable growing project at village level, which would give new economic opportunities to women. VIII. NEXT STEPS 8.01 The identification report and the proposed Technical Assistance/ Engineering Project contained therein have been discussed with Malian authori- ties in late May 1978. Tenders for civil works equipment have been launched in early May and consultants for management and engineering services have been invited to submit proposals in mid-June, 1978. 8.02 The President's Report and the Credit Agreement for the proposed Technical Assistance/Engineering Credit for the Office du Niger are under preparation, and negotiations are scheduled for August, 1978, with a view to Board presentation in September. This would leave sufficient time to make the Credit effective before the envisaged start of the project in November, 1978.  - 39 - 8.03 The CILSS working group on irrigation was to meet in July 1978 to discuss this identification report. However, the mission was unable to revise both the English and French version of this report in time for this deadline (taking into account the time required for transmittal and distribution of the study to CILSS members and examination of its content). Therefore, the Malian Government has requested postponement of this meeting. It is now scheduled for September 19-22 in Dakar. This meeting may give first indications of co-financing prospects for a future rehabilitation project.  - 40 - ANNEX 1 1. The Office du Niger and Its Settler Population I. The Office du Niger 1. Summary of History 2. Constitution 3. Staff and Organization 4. Financial Status II. The Settler Population 1. Demographic Data 2. Structure of Farms 3. Relation with the Office du Niger 4. Financial Position 5. Social Factors  - 41 - ANNEX I Page 1 MALI OFFICE DU NIGER - IDENTIFICATION REPORT The Office du Niger and Its Settler Population I. The Office du Niger 1.01 The Office du Niger is a large state enterprise engaged primarily in the production of rice and sugar in an irrigation scheme located in the Interior Delta of the Niger river. It occupies a central position in Malian agriculture, and in the economy as a whole. 1. Summary of History 1.02 The following data summarize the Office du Niger history: 1898: A technical mission from France visits the area to examine the possibilities of cotton production. 1922: The Compagnie Generale des Colonies begins its activities and engages the services of the American cotton specialist Dr. R. H. Forbes. 1929: Creation of the Service Temporaire des Irrigations du Niger. The French engineer H. Belime submits his plan for the develop- ment of 960,000 ha of irrigated land, of which 510,000 ha are to be planted to cotton, the remainder to rice. 1931: France passes a law approving the construction of the Markala dam. 1932: The Office du Niger is created by Decree of January 5, 1932. 1935: First settlements in the Kolongotomo sector and beginning of rice cultivation. 1937: First settlements in the Niono sector and beginning of cotton cultivation. 1942: Adoption of a plan calling for the development of 16,000 ha over a 10 year period. 1947: Completion of the Markala dam. 1948: Beginning of production in the Molodo sector. 1952: Development of the Kouroumari sector begins; long-staple cotton is introduced.  - 42 - ANNEX I Page 2 1958: Introduction of intensive cotton cultivation and improved land levelling methods. 1961: Ownership of the Office du Niger is transferred from France to Mali. 1962: General Africanization of staff. 1966/67: The first sugar factory (Dougabougou), built with assistance from the P. R. of China, begins operations. 1970: Cotton cultivation is discontinued. 1976/77: The second sugar factory (Siribala), also built with Chinese assistance, begins operations. 2. Constitution 1.03 The statutes of the Office du Niger have recently been revised. As established by ministerial decree No. 108 PG-RM, of September 2, 1967, they provide, in summary, that: (a) The Office du Niger is a national enterprise of an agro- industrial and commercial character, with legal personality and financial autonomoy. The head office is at Segou. (b) The responsible minister is the Minister of Rural Develop- ment. (c) The Office du Niger's capital is constituted by its fixed assets, the value of which will be determined by ministerial decree. (d) Its aims are - to make productive the middle Niger valley; - to execute works and improvements; to exploit the improved lands controlled by the irrigation networks, either through settlers or directly; to undertake studies and works relative to these aims; and - to process in its mills all commercial production from the irrigated area (as well as certain products, notably millet, produced outside the official irrigated plots). (e) The board of directors, nominated by decree No. 235/PG-RM dated November 1, 1976, comprises 20 members; its chairman is the Minister of Rural Development. The other members represent Government departments and allied institutions  - 43 - ANNEX 1 Page 3 such as the Banque de Developpement du Mali and OPAM (the State agricultural trading agency) as well as two representa- tives each of the staff and of the settlers. The Board must meet at least twice a year. (f) The Director-General has the widest powers to act for the Board including the power to: (i) appoint all employees except the Deputy Director- General and the Chief Accountant, who are ministerial appointments; (ii) determine salaries etc.; and (iii) represent the Office to third parties. (g) The Director-General must submit to the Minister: (i) the provisional trading report; (ii) the annual investment program; (iii) financial documents relative to management; and (iv) an annual operating report. (h) The Office du Niger may only obtain bank credit from the Banque du Developpement du Mali. (i) The financial year is to December 31, and the .balance sheet is to be submitted to Government auditors within three months. 1.04 These provisions have not yet been fully enacted. In fact, the new Board has not begun to exercise its controlling functions since the Office du Niger has not yet finalized its accounts for recent years (see section 4 below) and the Board wishes to examine these accounts at the beginning of its activities. It also appears that, contrary to provision (h) in the preceding paragraph, the Office du Niger has access to credit from sources other than the BDM. Until the Board assumes its full responsibilities, the Director General continues to have considerable latitude for his management decisions. 1.05 Another Decree (No. 60/PG-RM, of May 21, 1973) deals with the Office du Niger's power of, and responsibility for, management of the lands of the Niger valley commanded by the irrigation infrastructure, and its relation with settlers. The Office du Niger owns the irrigation distribution system from the primary canals (distributeurs) to the tertiary canals (arroseurs) but not the Markala dam, the feeder canal and the two main supply canals (Canal du Sahel and Canal de Macina) which are objects of strategic importance. These infrastructures, as well as the irrigated land, are the property of the State but under control of the Office du Niger (propriete d'Etat confiee en gestion  - 44 - ANNEX 1 Page 4 a l'Office du Niger). The first statutes of the Office du Niger had still provided that land ownership would be transferred to settlers after 10 years of occupancy but this provision was never applied and was abolished in the statutes adopted in the early 'sixties. Under the new statutes, the Office du Niger's responsibilities are restricted to the activities listed in para. 1.03, item (d), whereas until the early 'sixties the Office du Niger was also responsible for satisfying the social needs of the resident population (health care), for maintenance of roads and other activities. Transfer of these re- sponsibilities, and the assets related to it, to other Government services has created problems of valuating the Office du Niger's remaining assets (Section 4 below). 1.06 Decree 60/PG-RM also provides that the Director General shall submit an annual action program to the Board and, by March 31, each year an annual report to the Minister of Rural Development. Annual reports have been pro- duced regularly in the recent past. 3. Staff and Organization 1.07 Total staff of the Office du Niger counted close to 7,000 persons in the mid-'fifties, when expansion in area was still continuing. When works stagnated, this number was brought down to less than 5,000 employees in 1965. Staff was again drastically reduced by 1,700 employees in 1971, when cotton production had been terminated and production of rice "en regie directe" began to be phased out. Since that time, staff has increased gradually with the rise in paddy and, in particular, sugar production. In 1976, some 600 tem- porary laborers received permanent employee status. This brought the number of permanent staff up to 2,852. Distribution over different services and locations is shown in Tables 1 and 2; Table 2 also shows the level of skills. 1.08 In addition, there is a large number of seasonal laborers, many of them employed in sugar-cane harvesting. In 1976, the total number fluctuated between 7,300 (January-May) and 3,500 (June-October). 1.09 The large number of low-skilled persons is expressed in the average monthly salary of only MF 24,000 (US$50) per permanent employee. On the other hand, the Office du Niger has a large reservoir of experienced staff in the middle-level skills, a feature which distinguishes it from other agencies with a shorter history and a less developed "esprit de corps". Of the permanent staff, - 2% have served between 31 and 40 years, - 17% have served between 21 and 30 years, - 30% have served between 11 and 20 years, - 28% have served between 1 and 10 years,and  - 45 - ANNEX 1 Page 5 23% have been promoted to permanent status in the course of 1976. The average service length is 10 years. Experienced staff is concentrated mainly in the Works Department and in the Agricultural Service. 1.10 There is one permanent employee for 1.7 settler families but this includes employees engaged in activities not related to rice production. Without these, there is roughly one employee for 2 settler families or per 20 persons in rice cultivation. Staff salaries absorb 13-15,000 tons of paddy, which is 20-23% of marketed production or 15% of total paddy pro- duction. 1.11 The organizational structure of the Office du Niger is shown in Chart I attached to this Annex. In this section, only the following services will be discussed: - accounting - statistics - technical studies - works, and - agricultural extension, these being the services the mission has been most in contact with. 1.12 The Office du Niger's basic accounting system operates reasonably smoothly, and control of cash, bank accounts and stocks appears to be tight. However, the system is deficient not only in that annual accounts have not been produced since 1961 but also because useful management information is not forthcoming from the system. Attempts at analytical accounting have been made fro time to time but without operationally useful results. Manage- ment relies, instead, on statistical indicators produced independently by the statistical service (para. 1.13), which extracts them directly at the source in field offices. Although this pragmatic initiative to alleviate the lack of data is commendable, it is important that the accounting, budget- ing and reporting requirements of the Office du Niger be thoroughly reviewed in order to ensure that legal requirements and demands of management and fis- cal authorities are properly met. 1.13 The statistical office (Bureau des Affaires Economiques - B.A.E.) is a small unit which not only compiles statistical records from data provided by individual services but also undertakes surveys of its own, in particular the annual sample survey of yields. The B.A.E. also carries out special studies at the request of management, and in this capacity has endeavoured to fill the gap left by the accounting services (para. 1.12).  - 46 - ANNEX 1 Page 6 1.14 The Bureau of Technical Studies (called Bureau d'Etudes Generales - B.E.G.) is responsible for topographical, cartographic and technical studies for the development of irrigation infrastructures as well as for the control of works in execution. The B.E.G. was a key institution until the early 'sixties but as new developments petered out, its staff was drastically reduced. At present, it consists only of its Head, who is a senior engineer, 3 engineers (of which 1 surveyor), a number of middle-level staff (draughts- men) and 5 surveying brigades. This department requires considerable strengthening before preparation of rehabilitation works can begin. Due to serious understaffing, the B.E.G. has not been able to hold together in a usable form the wealth of information available; a general stock-taking and classification of documents seems to be in order. 1.15 The Works Department (Services des Travaux - S.T.) is the largest branch of the Office du Niger (if the unskilled laborers at the sugar estates, who are attached to the Agricultural Service, are left out of account). Its functions are complex and heterogeneous: - execution of all works, starting from irrigation canals and structures down to on-farm development (levelling); - maintenance of these infrastructures as well as of buildings; - operation of the Markala dam as well as of all irrigation structures down the line; - execution of mechanized operations in agriculture, in the first place threshing, but also ploughing of fields managed "en regie" and transport of products and farm inputs by road and water ways; and - maintenance of all mechanical equipment. The S.T. is based at Markala but has in each sector a subdivision with its own Mechanical Equipment Center. 1.16 Staff has been considerably reduced since development of new areas came to an end; maintenance operations on infrastructures have been severely limited by financial constraints. Although technical staff display ingenuity in producing spare parts and keeping old and worn-out equipment in operational conditions, there is a substantial amount of disabled but partly recuperable equipment in the yards of the Mechanical Equipment Centers. Monitoring of spare part availability and planning of future needs seems to be a weak point. 1.17 The Agricultural Service (Service Agricole) is responsible for extension work, preparing agricultural campaigns and collecting produce. The Director is based at Segou but has a Deputy Director at Niono, the central township of the agricultural area.  - 47 - ANNEX 1 Page 7 1.18 Agricultural extension services are organized according to the following system: - One extension agent (encadreur) in each village, of 30-40 families on average. The agent lives in the village and is thoroughly familiar with its inhabitants. In larger villages, the extension agent is a moniteur, (a higher-level agent who had several years' training in an agricultural training institute while the encadreur is trained on the job). - A Production Unit (Unite de Production) consisting of 2-9 villages, is directed by an intermediate level staff (Conducteur de Travaux) or by a senior Moniteur. - The Production Units are combined in the 5 Sectors of Kolongotomo, Niono, N'Debougou, Molodo, and Kourouma, comprising each between 2 and 7 Production Units. The Sectors are headed by an Engineer (Ingenieur des Travaux or Ingenieur des Sciences Appliquees) and a deputy with similar qualifications. (There is a sixth sector, Siribala/ Dougabougou, which comprises the two sugar estates and is, of course, organized according to the requirements of large- scale plantations.) - The Director and Deputy Director of the Agricultural Service are both Ingenieurs Agronomes. 1.19 The overall density of extension is one agent for about 30 families or 250 ha, which is fully satisfactory. 1.20 The Director General spends much time in the field and in parti- cular informs himself during semi-annual tours of several weeks duration, during which each village is visited. In day-to-day administrative matters, the Office of the Director General (and his Deputy) deals directly with each service but has little qualified staff to help coordinating activities. 4. Financial Status 1.21 It is not possible to give an accurate account of the Office du Niger's financial status as no accounts have been published since 1961. As a prerequisite for resuming normal accounting and reporting procedures, Government in 1972 requested the French firm SEMA (Societe d'Etudes et de Mathematique Appliquee) to undertake a comprehensive valuation of its assets; part of these (hospital, roads, etc.) had been transferred to other Government services in the 'sixties; in addition, other difficult questions needed to be settled, such as liabilities to the French Government and receivables from advances to settlers that were not recoverable due to the departure of many of these.  - 48 - ANNEX 1 Page 8 1.22 Following the submission of the SEMA report, Government took the necessary decisions on the ownership of assets and the capital/borrowing structure of the Office du Niger, on February 17, 1977. Legal steps needed to give effect to these decisions are being taken. These steps will clear the way for the preparation of definitive accounts for the years from 1972 onwards. 1.23 Recommendations for the accounting treatment of the re-evaluated assets and for capital reconstruction are contained in a report produced by the accounting firm Societe Fiduciaire de l'Est (Paris). Accounts for 1972-77 are scheduled to be finalized in 1978 and will be prepared on the basis of the adjusted 1972 accounts and from annual movements which have been recorded for subsequent years. From these "annual movement" accounts, the mission has prepared provisional trading accounts, details of annual sales, and flow-of- funds statements for recent years. While these are incomplete, they give a good indication of orders of magnitude of the Office du Niger's trading activities and, less reliably, its profitability. 1.24 The Office du Niger buys and sells mainly at prices that are annually negotiated between all Government agencies concerned and fixed by Government on the basis of those negotiations. The price-schedules (baremes) specify in detail the renumeration of agricultural produce and of each subsequent service performed in its transformation and conveyance to the final consumer. The price-schedule for rice is shown in Table 3. Prices are similarly fixed for sugar. Details of the sugar price schedule are not available; in 1977/78 the Office du Niger sold sugar to SOMIEX at FM 375/kg.. 1.25 Negotiating price-schedules is an exercise of crucial importance for a state enterprise's financial performance. In the bargaining process, each side (producers, transporters, traders) advances figures purporting to justify increases in charges, while Government (through the price stabilization agency ORSP) is intent on keeping prices as low as possible. Cost figures produced for this bargaining exercise are, understandably, not always without bias and should not be used for management decisions by the agency producing them. 1.26 The following general statements can be made regarding the Office du Niger's financial position: (a) The principal revenue of the Office in the six years to 1976 has been from rice, the annual value of which has steadily expanded to almost FM 3 billion. Sugar sales have rapidly become very important in the last three years, and with the opening of the Siribala sugar mill, 1977 sugar sales are expected to be at least twice the value of rice-sales. Details are at Table 4. (b) The provisional figures for the trading profit of the Office due Niger over the last six years (Table 4) are:  - 49 - ANNEX 1 Page 9 FM Million 1971 162 1972 -126 1973 718 1974 844 1975 1,957 1976 663 These figures may be overstated because of: (i) over-valuation of stocks; (ii) insufficient provision for doubtful debts; (iii) lack of depreciation; (iv) liability for various taxes and levies (para. 1.27); and understated to the extent that (v) some works constructed have not been treated as capital items. (c) The margin between the purchase and selling rates of the price schedules together with other income such as the levies paid by settlers, have allowed the Office to generate suffi- cient funds to cover recurrent costs, to replace certain items of equipment as they have worn out, and to undertake a limited amount of rehabilitation work (Tables 5 and 6); to the extent that repairs and maintenance works are executed on the Markala dam and other infrastructures owned by the State (para. 1.05), they are carried out on behalf, and at the charge, of Government but the Office du Niger has not, in fact, been paid for many years. Finally, the Office du Niger has been able to undertake a limited amount of maintenance, but substantially less than ideally required (see Annex 2, Section II). 1.27 As a trading enterprise, the Office du Niger is liable to pay taxes and duties; the principal charges paid in the years 1974 to 1976 were: 1974 1975 1976 ------FM Million------ Land taxes 193 11,638 - Vehicle taxes 4,407 4,213 4,319 Import duties 57,257 84,147 66,634 All other 2,305 1,120 1,315 Total 64,062 101,118 72,268  - 50 - ANNEX 1 Page 10 The Office du Niger is also liable to pay a direct tax of 10% on agricultural profits and 50% on industrial and commercial profits, and indirect taxes applicable to the provision of services to settlers (15%), to lodgers at the guest houses (11.5%), and, subject to certain exemptions, to production of sugar and alcohol. The lack of published accounts has meant that these taxes have not been paid. According to the Director General, the Office du Niger is exempt from fuel-taxes; the value of this exemption is estimated at FM 200 million annually. II. The Settler Population 1. Demographic Data 2.01 The farming population of the Office du Niger reached 50,000 in 1976 and is presently 51,032 (June 1, 1977). While the average rate of increase over the last 45 years has been 7% p.a., periods of expansion have alternated with periods of declining population (see Graph II at the end of this Annex). The main turning points were in the immediate post-war years when many Mossi, previously recruited under administrative pressure, left for their homeland, and again at Mali's independence, when many Voltaic settlers left for Upper Volta, which became independent at about the same time. The transitional period of the 'sixties saw the departure of the French adminis- tration in 1962, the decline of official producer prices, and increasing problems with cotton cultivation. 2.02 The settler population (4,757 families) is distributed over 5 sectors comprising 30 Production Units and 134 villages. Thus, the average village contains some 36 families or 380 inhabitants. The structure of the farming population is summarized in Table 7. The average family comprises 10 members of which 7 active persons (8-55 years). The number of adult male workers (15-55 years) is 2.7 per family on average. (Rice cultivation is nearly entirely the responsibility of men; women help in harvesting and winnowing, children in protecting the crop against birds). There are slightly fewer men than women but the sex ratio is much more balanced than in many rural areas touched by rural-urban migration. 2.03 Of the total farming population, 62% are from the 4th Region (Segou), i.e. the immediate surroundings, and a further 18% from the 3rd Region (Sikasso). The share of Voltaic settlers is now 12%. Most of these live in the Kolongotomo sector, the first one to be developed in the thirties; in that sector, 37% of the population are of Voltaic origin (mostly Mossi or Samogho). 2.04 A considerable number of settlers has been in the Office du Niger for a long time (Table 8). The figures clearly reflect the settlement history of the Office du Niger, with the sequence Kolongo, Niono/N'Debougou, Molodo, and Kourouma. Nearly 60% of settlers present in 1975/76 had been in the Office between 10 and 40 years. The positive side of this is the familiarity  - 51 - ANNEX 1 Page 11 of many farmers with irrigated agriculture; the disadvantage is that in many cases the age structure of old-timer families is less favorable than for families having arrived more recently, as many younger men have left, in the various difficult periods the Office du Niger went through, while the older people had no choice but to stay. This applies in particular to Kolongotomo, the oldest settlement, which has both the highest share of old-timers and a very over-age population. 2. Structure of Farms 2.05 In 1976, there were 4,542 families cultivating 38,500 ha, which puts the average farm size at approximately 8.5 ha. There are, however, considerable variations in farm size, as shown in Table 9. It appears that: - more than half of the holdings do not exceed 8 ha; - more than 10% are smaller than 4 ha; and - nearly 10% are larger than 16 ha. The farms exceeding 16 ha, while being small in number (400), occupy not less than 25% of the total cultivated area. On the other extreme, 25% of the area are cultivated by 45% of the settler families (close to 2,000). Part of the dispersion in the size of holdings can be explained by differences in family size (since holdings were attributed on the basis of 1 ha per family member). Family sizes vary between 2 at the lower end and more than 25 for large families. Some 70 very large holdings (of more than 30 ha) cannot be explained by this factor, however. These large holdings developed partly from expansion of efficient farmers who progressively took over abandoned land, and partly from the admission of non-farmers such as traders and civil servants in the post-independence period of the 'sixties. 2.06 In addition to their holdings of irrigable land, settlers frequently cultivate private land as well, - either to produce millet and sorghum, the other staple food, to which many are still attached and which is frequently eaten once a day, - or to produce more paddy on unauthorized plots, which are irrigated either from seepages in the dikes or through derivations from the drainage canals. The growing of paddy "hors casier" is of concern to the Office du Niger as farmers divert labor resources from their allotted plots to these areas; more serious is the fact that water is frequently obtained through the blocking of drains which causes drainage problems in the regular rice fields; control, and taxation, of these unauthorized fields is not carried out with the necessary determination.  - 52 - ANNEX I Page 12 2.07 The area covered by these fields "hors casier" is, by their very nature, unknown. The Agricultural Service of the Office du Niger estimates the total area at 3,000 ha in 1977/78 but a survey from an airplane over- flying the area suggests an order of magnitude of 15%, or 6,000 ha. If identified, unauthorized fields are charged a levy of 240 kg/ha (against 400 kg/ha on official fields). Yields are generally low but if farmers are not detected this is compensated by the levy saved, and by the possi-- bility of selling the paddy to private traders who frequently pay more than the official producer price. 2.08 Ox-drawn cultivation is the general rule in the Office du Niger. Ploughs, harrows, in some cases carts, are the elementary equipment used. Harvesting is done by hand, with sickles, while threshing is done by machines supplied and operated by the Office du Niger against a fee. Equipment per farm is shown by sector in Tables 10-14. There are no large differences in equipment per farm among the different sectors (Table 15). On the whole, the density of equipment and draught-oxen per ha has increased in recent years (Table 16). This development is probably one of the factors contri- buting to the increase in yields observed over the last 5 years as there is a clear correlation between equipment density and yields (Table 17). 2.09 In addition to their draught animals, settlers keep other cattle and small animals at the farm (Table 18). These sedentary animals are only part of their animal wealth, however; an unknown but probably very substan- tial number of cattle is entrusted to Peulh herdsmen who fluctuate with these herds between the grazing lands at the fringe of the Sahelian zone and the Office du Niger, where they graze in the rice-fields between January and May. 2.10 A considerable number of settlers does not own the necessary basic equipment (Table 19). Lack of a plough is relatively rare (5%) but 20% of farmers have no oxen or only one ox, and a similar number has no harrow. These farms rely on better equipped neighbors to supply them with equipment, animals, and, sometimes, services of an attendant. Since owners of this equipment look after their own fields first, this tends to delay ploughing, sowing and other operations in the under-equipped farms, with consequent losses in yields. 2.11 Also, these services give rise to income transfers which further accentuate the differences resulting from the dispersion of the size of holdings. According to extension officers at the Office du Niger, ploughing of 1 ha cost FM 10,000/ha in 1976/77 if oxen, plough and one laborer were supplied, and FM 4,000/ha for oxen and plough only. Thus, the cost of one laborer is FM 6,000/ha, or at 7 days for 1 ha ploughed, about FM 850 per man-day. This may include a profit for the farmer supplying the laborer, however. 2.12 The Office du Niger has, since 1969, made four attempts to improve the equipment ratio on under-equipped farms, but with little success. Oxen or implements supplied on credit were frequently sold without delay in order to meet other obligations with the proceeds. New institutional arrangements need to be found for this problem.  - 53 - ANNEX 1 Page 13 3. Relations with the Office du Niger 2.13 The settlers in the Office du Niger do not own the land they culti- vate. (The land is owned by the State and is given in trust to the Office du Niger). The settlers' position is similar to that in the traditional system: he is given the use of the land which he enjoys as long as he effectively cultivates it. Occupancy of a lot is also normally transferred to surviving family members in the case of death if these are able to cultivate the land for themselves. Evictions are possible if farmers do not comply with culti- vation guidelines or fail to pay their debts. However, only a few settlers have been evicted in each of the last few years. (The last general clean-up occurred in 1970). Table 20 shows the terminations of the last two years by reason. It is apparent that resignations are the most frequent cause of termination and amount to 2-3% of the families annually. Flights are rela- tively numerous (1% annually) but occur nearly entirely in the Kolongotomo sector and are explained by the high indebtness which characterizes farmers- in this sector (para. 2.22). 2.14 Since the termination of irrigated cotton cultivation and under the impact of the drought years of the early 'seventies, there has been an upsurge in applications (Tabled 21). The Office du Niger keeps files of applicants and decides applications mainly on the basis of two criteria: - at least 3 active male persons per family, and - ownership of minimum equipment of one pair of oxen and a plough. Only a fraction of suitable applications could be accepted over the last three years. 2.15 Until recently, settlers were given 1 ha per family member, regard- less of the number of active persons. This has resulted in large farm sizes of initially 9-10 ha and presently 8-9 ha per family, which corresponds to an average holding per active male family member (15-55 years) of about 3.5 ha, which is well beyond what he can cultivate with the desirable intensity. The Office du Niger is now considering to allocate land on the basis of the number of active male family members. 2.16 Besides land, families receive the use of a house built in tradi- tional style by the Service des Travaux, subsistence cereals for the first year of cultivation (reimbursable) and credit for the purchase of agricultural equipment and oxen on the usual terms (30% down payment and repayment of 35% in each of the two following years). Shortage of funds for farm credit has led to the adoption of the new policy of only accepting equipped farmers; it appears, however,that many new settlers do not have the equipment they claimed to own and must be provided with the minimum on credit since eviction on grounds of false pretenses is not practised.  - 54 - ANNEX 1 Page 14 2.17 Services rendered by the Office du Niger comprise: - supply of water; - maintenance of the infrastructures except for the terminal canals (arroseurs); - supply of improved seed; - mechanical threshing of paddy; and - extension advice. Farmers' obligations are on the other hand: - cultivation of the land allocated to the family; - observance of the guidelines laid down by the extension service (sowing dates, etc.); - maintenance of terminal canals; - delivery of the entire paddy output except for a provision for seeds (120 kg/ha) and home consumption (300 kg/person); - payment of a levy which has from the beginning of operations remained constant at 400 kg/ha; and - payment of mechanical threshing at a rate of 120 kg of paddy per ton threshed. As from 1977/78, the Office du Niger retains an additional amount of 100 kg of paddy per ha as a deposit to ensure that maintenance of terminal 'canals is either carried out, or paid for in kind. Most farmers have neglected maintenance works, and this deposit will be forfeited in future if mainte- nance is found to be wanting. 4. Financial Position 2.18 Settlers derive their income mainly from the following sources: - growing rice in the allocated fields as well as in unauthorized fields ("hors casier"); - other agricultural activities such as growing some rainfed crops (millet) and vegetables on irrigated plots (onions); and - animal husbandry (Table 18).  - 55 - ANNEX 1 Page 15 2.19 Income from rice cultivation is shown in Table 22. Charges amount to about 45% of the value of delivered paddy and to about 35% of the value of net production, i.e. including home-consumption but after deduction of seed requirements. In spite of the high level of aggregation, it is apparent that - income in the Kolongotomo sector is far below the average; - income in the N'Debougou sector is 60% above the average (or 50% above the average without Kolongotomo). A breakdown by Production Units shows that the sector average is fairly representative for conditions in each unit; this does not exclude, of course, that conditions in individual villages and families show the usual dispersion. Excluding Kolongotomo, where cultivation conditions are markedly inferior, average cash income from rice cultivation is about 366,000 MF per family (US$750), or US$65 per capita, and total income from rice cultivati6n, including subsistence allowances, close to US$90 per capita. 2.20 The structure of charges is summarized in Table 23. The levy accounts for more than half; threshing, seed, fertilizer and credit repay- ment are the other main items. On-farm cost items not procured through the Office du Niger must be deducted from the cash income in Table 22. In most cases, these costs are limited to renewal of equipment (or oxen) not purchased on credit. (Only new settlers are entitled to purchase equipment on credit.) In the case of underequipped farmers, there are payments for the hiring of oxen and ploughs from better equipped farmers; in the case of families with few active males, there will also be expenditures for hired labor during the harvest season. On the other hand, farmers also sell some paddy through private trading channels, and to that extent the incomes shown in Table 22 underestimate real income levels. 2.21 Table 22 shows farmers' charges actually paid while Table 23 shows charges due. The difference is insignificant for all sectors .except Kolongotomo. In the latter case, farmers have kept accumulating debts, never repaying more than half their annual charges (Table 24). While farmers in the other sectors, including the heavily indebted cotton-growers in Niono and N'Debougou, repaid their debts within a year or two after termination of cotton cultivation, farmers in Kolongotomo contracted debts mainly, because of the low yields (due to poor drainage and heavy infestation with wild rice). Average debts in all other sectors are presently only US$13 per family but in Kolongotomo they amount to US$400 (Table 24). This state of affairs is the main reason for the large number of flights of settlers recorded in that sector. Deserters are mostly Voltaics who return to their homeland; Malians in debt tend to flee less frequently since they are liable to be tracked down in their village of origin or wherever they choose to settle.  - 56 - ANNEX 1 Page 16 2.22 Settlers' incomes as shown in Table 22 must be adjusted for incomes derived from the other activites mentioned in para. 2.18: - Income from other crop production and animal husbandry was estimated in a 1974/75 sample survey at 22% of income from rice cultivation. 1/ - Rice production "hors casier" is partly included in the income estimates of Table 22, but the extent of unauthorized rice- growing seems to be underestimated; on the basis of 6,000 ha as estimated by the mission, rather than the 3,000 ha quoted by the Office du Niger, and yields of 1.5 t/ha, income must be adjusted by a further 10% (taking into account the higher paddy price obtained in the private market). These adjustments result in a total income of approximately US$105 per capita which is slightly above the Malian per capita GDP of just under US$100, and well above the average rural income level. (Vegetable-growing, a most lucra- tive activity, happens to be most wide-spread in the Kolongotomo sector, and this tends to mitigate to same extent the income discrepancy between this sector and the rest of the Office du Niger, as shown in Table 22.) 5. Social Factors Health 2.23 Until 1967/68, the Office du Niger had its own health service for its employees and the settlers. Like several other assets, the health infrastructure has been transferred to general Government services; they are now the responsibility of the Ministry of Health. 2.24 The area of the Office du Niger (including headquarters at Segou) is served by the following institutions: - a full hospital (Hopital Regional) with a team of physicians and adequate equipment at Segou; - a secondary hospital with one senior physician, at Niono, the central township of the Office du Niger; - a dispensary at Macina, somewhat outside the Kolongo sector; - infirmaries at Kolongo, Diabali (in the Kouroumari sector) and N'Debougou, the latter with facilities for childbirth under a mid-wife's supervision. The dispensary is run by a doctor; infirmaries are under the direction of certified nurses. 1/ Office du Niger, Project de Factibilite - "Office du Niger", no date, page 35.  - 57 - ANNEX 1 Page 17 2.25 Employees of the Office du Niger are examined once annually, as required by law. The Office du Niger, for this purpose, made a special contract with the Niono hospital to carry out these examinations in all sectors except Kolongo. This arrangement has not been satisfactory since the doctor in charge could not cope with the task besides his other duties, and the Office du Niger has entered into discussions with the Ministry of Health on the possibility of creating a health infrastructure in each of the sectors. 2.26 The Office du Niger contributes part of the costs of treatment for their employees: 50% of cost of drugs and 80% of hospitalization costs are reimbursed to the employees. 2.27 Health care is less well defined for settlers. Thye use the existing hospitals in case of illness and are charged according to their ability to pay; the latter is established on the basis of inquiries made at the Office du Niger (Division du Paysannat). 2.28 According to the Segou health authorities, the most frequent diseases are, predictably, malaria and bilharziose (schistosomiasis). In 1976, the following number of cases were treated in the Office du Niger area: Dougabougou Kourouma Markala Niono/Molodo Kolongo Total Malaria 10,278 12,620 12,551 35,449 Bilharziose 822 871 1,051 2,744 Even taking into account that these figures include persons who are not settlers or employees of the Office, it appears that malaria is fairly general. The figures for bilharziose do not give any indication of the prevalence of the disease. According to health authorities, more than 90% of the cases are of the less debilitating vesical variety and maty settlers affected by the disease do not request treatment. Moreover, the virulence of schistosomiasis (of the vesical variety) normally decreases in persons above 30 years of age who appear to acquire a certain immunity. Bilharziose is treated with Ambilhar and Anthomaline. Education 2.29 Primary education is provided, in the Office du Niger area, in Diabali (for the Kourouma sector), in Niono (for Niono, N'Debougou and Molodo), and in Kolongo. Schools in Niono and Kolongo comprise both the 1st cycle (6 years) and the 2nd cycle (3 years), which leads to the Diplome d'Etudes Fondamentales. The Diabali school only has the first cycle. Secondary education is provided in the Lycees of Segou and Markala. 2.30 School attendance is fairly general among children of Office du Niger employees. Most of these wish to see their children educated; in addition, there is a financial incentive since family allowances can only  - 58 - ANNEX 1 Page 18 be drawn for children attending school. Children attending schools in some distance from their home usually board with relatives or friends. The Office du Niger has constructed the primary schools in its area and the houses of teachers as well. 2.31 Table 23 summarizes the literacy rate for the settler population and shows that only 11% of the age group of 8-14 years attend school (19%. for boys, 5% for girls). This is low compared to other rural areas in Mali where the national average is 20% for boys and girls together. The total number of literates in a population of 51,000 is only 873; related to the population above 14 years of age, this is a literacy rate of 3%. Nearly all of these are adolescents. 2.32 The Direction Nationale de l'Alphabetisation Fonctionnelle et de Linguistique Appliquee (DNAFLA) has organized an adult literacy course in the Office du Niger in each of the 5 sectors; courses normally comprise a first and a second phase and are followed up by the so-called "education permanente" for literate participants; these are supplied with relevant reading material to keep up and improve their reading skills. Instruction is provided by literate members of the community who have received some pedagogical instruc- tion and are supervised by the head of the ZAF (Zone d'Alphabetisation Fonctionnelle). The ZAFs are supported through the supply of teaching materials; the head of the ZAF receives a moped and an allowance for fuel. 2.33 Two of the 5 ZAFs have closed down following the transfer of their heads to other areas, and activities in the remaining ones appears to be dormant too. The attempt to spread literacy among the adult settler popula- tion has received no support from the Office du Niger (financial or otherwise). Settlers Representation 2.34 Settlers elect representatives at the village, production unit, and sector level. There are, several times annually, meetings of the assemblies constituted by these delegates, at which matters of interest to the settlers are brought to the intention of the Office du Niger, and where communications of the Office du Niger are passed on and explained to' delegates. Two of the settler delegates will be represented on the Board of the Office du Niger (para. 1.03-1.04). Contact between settlers and the Office is further assured by frequent field trips of the heads of the sectors and of the Director General (para. 1.20). 2.35 Participation of settlers in the organization of operations such as paddy marketing or credit administration is virtually non-existent. There are 30 cooperatives (at the level of Production Units), but these are not volun- tary groupings but entities created by the Office du Niger. One of the main difficulties is the lack of competent administrators, which is not surprising at the prevailing level of literacy among settlers. According to the Office du Niger management, the few literate settlers who have occupied these func- tions, often took unfair advantage of the lack of education of the other members, and the consequent absence of control. These cooperatives, matters relating to settlers' welfare, as well as admission of new settlers, evictions, and credit administration are handled by the Division du Paysannat et des Cooperatives (see Chart I).  MALI OFFICE DU NIGER Organization Chai jCo.ccnod~IOnob.J ;tD!uv M, -| Tednk. l Economic 51Stl- | | c F"reij Adn9,.1,,1,%100 A-cormdrra A tUI- PTheCrel oct WTlht Mr. E.Oilo Mr Korwl Mf oure M Ni-pd.. Mr. M. D. K- M ter,_ [ 3~~~~~~~~~~~~~~~O A I S O ned I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.l .. 0) r~~~~~~~~~~~~~I -e , . _ ei -,r.t.ct r,i . tr, Poer.. _ - ~ M_l _ ic Mitis _ lie Ite Worlrt dnk-tRS4S  C..)~~~~~C INTEGRATION OF LOCAL POPULATION RECRUITMENT FROM DISTANT AREAS (UPPER VOLTA) m m IrI O DEPARTURE OF VOLTAICS; MECHANIZATION m z \ ~~~~~~~~~~~m 0 -n C,' C,, rn RECOVERY AND NEW RECRUITMENT r j 0 1_ Cz 2! r~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-a > C)m DEPARTURE OF VOLTAICS CD 0-) END OF COTTON CULTIVATION SAHEL DROUGHT 2? -T II 1A8 T . _N  MALI OFFICE DU NIGER - IDENTIFICATION REPORT Staff (Permanent Employees) of the Office du Niger, by Service and Qualification. July 1976 Effectifa (Personnel Permanent) de l'Office du Niger, par Service et par Profe6sion, Juillet 1976 Engineers Techniciana and .skilled Laborera Semi-skilled and Intermediate and Laborers and Unskilled Executives Staff Clerical Staff Clerical Staff Laborers Total irector General Office 3 1 2 8 2 16 Direction G166rale Iminietration 2 10 28 71 13 124 Service Adminintratif ,counting 2 15 34 16 3 70 Comptabilite Generale ipplies 2 3 20 71 41 137 Service A.G. )rks 5 39 90 627 179 94 .Oervice des Travaux / ;ricultural Exteneion / i6 32 57 264 697 1,066 Service Agricola g idustrial / 2 11 27 187 28 255 Service Industriel L-n )mmercial / 2 1 12 88 43 146 Service Commercial ; :atiatics 1 4 8 26 1 40 Bureau des Affaires Economiques schnical Studies 1 6 125 7 58 Bureau des Etudes Oenerales )tal 36 122 287 1,383 1,024 2,852 Totaux Ing6nieurs Techniciens Ouvriers Ouvriers et Cadres Cadres et Agents Qualifi6a et et Employ6s Administratifs de Maitrise .Employ6s Sp6cialis6s Manoeuvres Totaux Includes also operation of agricultural machinery, repair and maintenance / Y inclus execution des operations m6canim&es en agriculture, r6paration ' ' of equipment, and water transport. et entretien den 6quipements *6caniques, et transport. Includes numerous unskilled staff for sugar estates and for rice fields Y inclus lea manoeuvres pour lee plantations sucri&res et lea rizi4rea "an regie". exploitees en regie directe. Mainly 2 sugar factories and 4 rice-mills. ]/ En premier lieu, lee deux sucreries et les quatre rizeries. Marketing of produce. / Vente des produits.  MALI OFFICE DU NIGER - TIENTIFICATION REPORT Staff (Permanent Employees) of the Office du Niger, by Service and Location, July 1976 Effectifa (Personnel Permanent) de l'Office du Niger, par Service et Centre, Juillet 1976 Segou Narkala Dougabougou Niono Molodo NODebougou Kourouma Diabali Kolongo Kokry Total irector General Office 16 - - - 16 Direction Gen6rale dministration 60 9 12 6 7 6 4 9 6 5 124 Service Administratif ccounting 29 8 5 9 5 - 9 - 5 - 70 Comptabilite Gin&rale upplioa 3 63 13 12 15 9 - 13 9 - 137 Service dee A.G. lorks - 307 98 67 81 113 - 183 - 91 940 Service des Trava'ux gricultural Extension 41 - 600 / 47 49 66 202 - 61 - 1,066 Service Agricole ndustrial 8 - 163 - 21 - 47 - 16 - 255 Service Industriel :ommercial 52 10 21 19 18 _ 11 _ 15 - 146 Service Commercial' ;tatistics 14 8 3 1 4 3 1 2 1 3 40 Bureau de A.E. 'echnical Studies - - - - - - - 58 Bureau des E.G. 'otal 281 405 915 161 200 197 274 207 113 99 2,852 Totaux ;;urar estates / Plantations canne A sucre I Fields managed "en regie" by Office du Niger (2000 ha in 1976) / Champs en regie directe (2000 ha en 1976)  - 61 - ANNEX 1 Table 3 MALI OFFICE DU NIGER - IDENTIFICATION REPORT Official Price Schedule for Rice Bareme Riz Office du Niger 1976/77 1977/78 ---Malian Franc-- -ranc Malien- 1. Payment to producer per ton of paddy 40,000 45,000 Prix au producteur - 2. Paddy losses 5% 2,000 2,250 Dechets dpssication 5Z 3. ON costs - Sector Production and Commercial Departments 4,507 5,859 Frais de collecte 4. Financial costs - interest on ON seasonal bank credit 1,898 2,127 Frais financiers 5. Sacks and twine 3,000 4,249 Sacherie Paddy et Ficelles 6. Transport and handling field to factory 3,209 4,261 - Transport Manutention- Chasp/Usine 7. Proportion of head office costs 1/ 6,580 3,597 Participation frais generaux 8. Crop protection - 500 Protectioa cultures 9. Per ton cost of paddy delivered to mill 61,194 67,843 Prix de revieut Paddy/Usine 10. Equivalent per ton of rice at milling rate of 62% 98,700 109,424 Valour Riz rendeuent 622 11. Milling costs 8,695 10,434 Frais d'usinage 12. Rice Price ex-mill 107,395 119,858 Prix de revient carreau usine 13. Transport, handling to Segou 3,232 4,137 Transport et Manutention 14. Rice Price ex-Segou 110,627 123,995 Prix de revient Quai Segou 15. Price to OFAM 2/ 102,138 110,000 Prix de cession reconduit lb. Subsidy-ORSP 3/ 8,489 13,995 Soutien ORSP S/Tonnage OPAM 1/ Overheads are allocated between rice and sugar in proportion to sales. Since sugar overtook rice in 1977/78 (with the opening of the Siribala factory,)the overheads allowance for rice is correspondingly reduced./ Les frais geniraux attribues sont au riz et au sucre, respectivement, proportionellement au volume des ventes. Puisque le sucre depasse le riz depuis la mise en service de Siribala en 1977, le montant des frais ginEraux pour le riz diminue en cette annee. 2/ Office da Produits Agricoles du Mali/(Cereals Marketing Agency). 3/ Office de Regularisatioa et de Soutien des Prix/ (Price Regulation and Support Agency).  -62 - ANNEX I MALI Table 4 OMCE W3 NIGZR - IDESTIFICATION REPORT Provisional Tradinz Accounts 1/ Comptes d'Exploitation Provisoires 1/ Years to December 31 1971 1972 1973 1974 1975 1976 Annee au 31 decembre ----------------------------FM Million